Both we, and others, are under considerable pressure in our domestic economies. There is a tendency toward economic protectionism. And there is question about the most appropriate ways to use our power in a world grown so complex.

Panama is a small country. It would be all too easy for us to lash out, in impatience and frustration, to tell Panama and Latin America-and other countries around the world-that we intended to speak loudly and carry a big stick and to turn away from the treaties four Presidents have sought over so long a time. But that, in my judgment, would not be conduct appropriate to a responsible world power or consonant with the character and ideals of the American people. Any nation's foreign policy is based, in the end, not just upon its interests-and, in Panama, our interests are clear and apparent. It also is based upon the nature and will of its people.

I believe the American people want to live in peace with their neighbors want to restraint * want all peoples, everywhere, to have their own chance to better themselves and to live in self-respect.

That is all a part of our American tradition.

And that is why I am convinced that after the national debate they deserve, these treaties will be approved without reservations by the Senate, with the strong support of the American people.

STATEMENT BY HON. SOL M. LINOWITZ

Mr. Chairman and Members of the Committee: Although I have not been involved in Panama Canal diplomacy for as many years as Secretary Vance and Ambassador Ellsworth Bunker, I have for a long time been deeply concerned about the Panama Canal issue and its implications for our whole relationship with Latin America. For three years prior to my designation as Co-Negotiator of the new Canal treaties, I served as Chairman of the Commission on United States-Latin American Relations.

In the Report which our Commission issued on December 20, 1976 we said: "The most urgent issue the new Administration will face in the Western Hemisphere in 1977 is unquestionably the smoldering dispute with Panama." We went on to say: "1977 will be a crucial year for resolving the volatile Panama issue; if negotiations do not produce an equitable solution during this coming year, deepened hostility seems inevitable." We urged the new President "to exercise prompt, vigorous and decisive leadership in negotiating an acceptable compromise with the Panamanian Government while serving our own interest in the Canal. Such an action will also indicate our desire to address the issues which concern the United States and Latin America in a more cooperative and mutually respectful atmosphere."

Our recommendation was: "The new Administration should promptly negotiate a new canal treaty with Panama; it should involve members of both parties and both Houses of Congress in the negotiations; and it should make clear to the American public why a new and equitable treaty with Panama is not only desirable, but urgently required."

Mr. Chairman, the treaties which we have negotiated and which are now before you in large measure follow that prescription. We have negotiated treaties which are, we believe fair and equitable and which fully preserve our interest in the canal while taking into account Panamanian aspirations. In the course of the negotiations, we have involved members of both parties and both Houses of Congress. And the terms we have agreed upon clearly reveal a more cooperative and mutually respectful atmosphere in hemispheric relations.

There are, I believe, three basic facts which must be understood about the Panama Canal issue.

First, it is an issue which involves far more than relations between the United States and Panama. For it is an issue which affects all United States-Latin American relations. In the eyes of our Latin American neighbors, the Panama Canal runs not just through the center of Panama, but through the center of the Western Hemisphere. All the countries of the hemisphere have made common cause in looking upon our position in the canal as the last vestige of a colonial past which evokes bitter memories and deep animosities. So in going forward with these new treaties with Panama, the United States will be improving its position with virtually all the countries of this hemisphere whose attitude towards us as a nation will be importantly influenced by how we conduct ourselves on the Panama Canal issue. Second, our primary interest in the Canal is, and always has been, to assure that it remains secure and open, on a neutral, non-discriminatory basis. Viewed in this light it is unmistakably clear that the greatest threat to the operation and security of the Canal would be to try to insist upon retention of the present outmoded treaty

and its anachronistic provisions-provisions which have in the past and can so easily again in the future, trigger hostility and violence. The simple fact is that if we do not agree upon treaties which are mutually agreeable and acceptable, the time may come when we may find ourselves in the position of having to defend the Canal by force against a hostile population and in the face of widespread condemnation by the countries of Latin America and even the rest of the world.

Third, it is, therefore, clear that the best way to preserve an open, accessible and secure canal and to maintain its permanent neutrality would be to substitute for the 1903 Panama Canal Treaty a new arrangement which will be mutually fair, which will properly provide for Panama's just aspirations, and which will take into full account our own national needs. Putting it another way a new treaty arrangement is the most practical means for protecting the very interests we are seeking to preserve in the Canal.

We believe that the new treaties meet this test by preserving for the nation the important interest it has in assuring that the Canal remains secure, accessible and open on a nondiscriminatory basis-and in a manner which will both advance our national security interests and further our hemispheric objectives.

With your indulgence I would like to recall a few words of history about how we got where we are in the Panama Canal.

During the middle of the 1800's we were, as a young nation, interested in the possibility of constructing a canal across the isthmus in order to connect the Atlantic and Pacific Oceans. This need was dramatically underlined when, during the Spanish American War, it took the battleship Oregon 67 days to get from the Pacific coast to its Atlantic battle station.

At the end of the 1800's the French Canal Company had undertaken to construct a canal through the Province of Colombia known as Panama. By the end of the century it acknowledged failure-failure because of disease, because of technological and scientific problems which seemed insurmountable, because of lack of financing, and finally because of lack of spirit and morale.

At that time an engineer, Philippe Bunau-Varilla, who had worked for the French Canal Company, spurred an effort for the United States to take over the French company's assets and enter into a treaty with Colombia for the completion of the canal. Such a treaty was rejected by the Colombian Senate.

At that point it was suggested that the Province of Panama might undertake to declare its independence from Colombia and then enter into a satisfactory treaty with the United States. On November 4, 1903 a revolution occurred in Panama and a few days later the United States recognized Panama's independence. Thereupon a treaty was entered into known as the Hay/Bunau-Varilla treaty.

The treaty granted the United States rights "in perpetuity" to construct a canal within a zone 10 miles wide over which the United States would exercise the "rights, powers and authority" it would have if "it were the sovereign." Secretary of State Hay candidly wrote to a leading Senator that the treaty was "very satisfactory, vastly advantageous to the United States and, we must confess with what face we can muster, not so advantagous from Panama." The treaty was ratified in 1904 and construction of the canal was begun immediately. It was completed in 1914 after a brilliant engineering and scientific performance by American engineers, doctors, scientists and builders who were determined to conquer the unconquerable and make the canal a reality.

Today the Panama Canal stands as an engineering marvel, as one of this country's greatest accomplishments. In a very real sense it was our moon shot of the early 1900's. Any America must view with pride this highly complex, integrated hydraulic system of locks, dams and artificial bodies of water designed to move ships over the uplands of the isthmus for 50 miles from ocean to ocean.

And we can also point with pride to the way we have operated the Canal. For 62 years it has been run as a public service for the nations of the world rather than as a business. Tolls have been set as low as compatible with meeting costs and providing a modest return, and world commerce has been a major beneficiary of the Canal operation. The toll rate when the Canal opened in 1914 was $1.20 per Panama Canal ton; today it is $1.29.

It is against this backdrop that these new treaties must be evaluated.

Several arguments have been widely advanced against a new treaty arrangement with Panama. Secretary Vance has already discussed the sovereignty issue, and I would like to touch upon several other major concerns which have been asserted in connection with the new treaties.

First, will the new treaties in any manner prejudice our national security? Your Committee will have the benefit of the testimony of our foremost defense authorities on this score; but it is important to stress that in all of our negotiations we have

worked closely with the Department of Defense and the Joint Chiefs of Staff to assure that our national security interest would not in any respect be prejudiced under the new treaty arrangements. And we have been assured by them that the treaties we have agreed upon will not only preserve but indeed enhance our national security interests.

Second, will the new treaties seriously affect United States commercial interests? The new treaties, we believe, are the best protection of our commercial interest in the Canal. The simple fact is that the commercial value of the Canal has diminished considerably as world commerce patterns and technologies of shipping have changed. Today supertankers and other larger vessels cannot use the Canal. In percentage terms the Canal is much more important to the various countries of Latin America than it is to us. Today approximately 7 percent of total United States international maritime trade passes through the Canal each year. About 4 percent of the trade between the East and West coasts travels the Canal. It is, therefore, clear that though the Canal is still important, it has, to a substantial extent become economically obsolescent.

Third, is the present Government of Panama the one with whom we should be negotiating these new treaties? For over 13 years we have been engaged in negotiations for a new Panama Canal treaty. The present Chief of Government, General Omar Torrijos, who has been in power for almost 9 years, has been committed to trying to work out a new treaty with the United States and in doing so he is supported by the people of his country and is following in the footsteps of every Panamanian Head of State since 1903-irrespective of ideological differences. Moreover, pursuant to the Panamanian Constitution, the treaties will now have to be submitted to a plebiscite in Panama next month so that the Panamanian people will be able to express their judgment with respect to these treaties.

Secretary Vance and Ambassador Bunker have already described to you the major terms of the new Panama Canal treaty, and I would like to focus my remarks on the neutrality treaty. This treaty commits the United States and Panama to maintain a regime of permanent neutrality for the canal. Under the rules of neutrality set forth in this treaty, the Canal is to be open to merchant and naval vessels of all nations at all times without discrimination as to conditions or charges of transit. A special provision authorized United States and Panamanian warships to transit the Canal expeditiously in both peace and war without being subject to any restriction as regards means of propulsion, armament or cargo.

Under this provision no question can be raised about the right of U.S. naval vessels to transit the Canal with all their weapons nor can any restriction be placed on the type of cargo they may carry. Further, we are assured of a preferential right to expeditious transit of our naval vessels whenever we consider this necessary. Under the treaty the United States is in a position to assure that the Canal's permanent neutrality is maintained and there is no limitation on our ability to take such action as we may deem necessary in the event the Canal's neutrality is threatened or violated from any source. The precise type of response we might determine to make would of course depend upon all the political, military, legal, economic and other factors involved in a particular situation. But the key point is that it is for the United States to make the determination as to how we should respond and how we should defend our rights under the Canal's regime of permanent neutrality. Thus the treaty provides for the United States maximum freedom to determine how to carry out its responsibility for Canal neutrality. We are under no obligation to consult with or seek approval from any other nation or international body before acting to maintain the neutrality of the canal nor does the treaty in any other way limit our ability to act.

This permanent neutrality treaty will also apply to any other international gateway that may be built in Panama in the future. In short, the neutrality treaty provides a firm foundation for assuring that our long-term interest in the maintenance of an open, accessible, secure, efficient Canal is preserved-now and in the future.

In order to emphasize the importance of the regime of neutrality to world shipping there is a protocol to the neutrality treaty which will be open to accession by all the countries of the world. The signatories to this protocol will, in effect, endorse the neutrality treaty by specifically associating themselves with its objectives and by agreeing to respect the regime of permanent neutrality of the Canal both in time of war and in time of peace. The Instruments of Accession will be deposited with the Secretary-General of the Organization of American States.

The lasting and deeply significant implications of this treaty have been fully recognized by the Panamanians. In signing the treaties at the Pan American Union here in Washington on Septemer 7, 1977, General Torrijos clearly told the people of

Panama, the people of the hemisphere, and the people of the world: “We have agreed upon a neutrality treaty that places us under the protective umbrella of the Pentagon. This pact could, if not administered judiciously by future generations, become an instrument of permanent intervention."

Both countries recognize that this treaty is designed not only to assure that our own interests will be fully preserved but to assure the other countries of the world that the United States will be in a position to do whatever may be required in the furture to preserve the openness, security and accessibility of the Canal.

It is vitally important that the American people study these new treaties carefully and open-mindedly and recognize what is at stake. The issues involved are far too complex and significant to be compressed into a slogan or reduced to the size of a poster. In these agreements we believe we have a rare opportunity to demonstrate to the world how a large nation and a small nation can settle their differences amicably and with mutual respect and enter into a lasting partnership of which future generations will be proud. They will bear witness to our intentions to build a balanced, constructive, and lasting relationship among the countries of the hemisphere.

Theodore Roosevelt put it very well:

"We have no choice as to whether or not we shall play a great part in the world. That has been determined for us by fate. The only question is whether we will apply that part well or badly."

STATEMENT BY AMBASSASOR ELLSWORTH BUNKER

With the opening today of the hearings, the resolution of one of our nation's most difficult and pressing foreign policy problems enters a new stage. You have before you two new treaties designed to assure our interest in a secure and efficient Panama Canal.

Those of us who have participated in the negotiations have completed our task. It is now up to the Senate to examine the agreements and to make a judgment on

them.

My first involvement with Panama Canal diplomacy came in 1964, when I was serving as Ambassador to the Organization of American States. From the vantage point it was possible to see at firsthand how urgent was the need for the United States to modernize its relationship with Panama and how important such a step forward was for our position in the Hemisphere.

My direct association with the Canal negotiations began in 1973. At that time the two sides began working out a set of principles to serve as a guide in preparing new treaties. These principles-which have guided the subsequent negotiations-were embodied in the Joint United States-Panamanian Statement signed at Panama City in February 1974. In January of this year these principles were reaffirmed by Secretary Vance on behalf of the Carter Administration. This action followed a thorough policy review in which the incoming Administration established its positions on the principal issues at stake in the negotiations.

The fundamental concept in the 1974 principles is that of United States-Panamanian partnership. Throughout the discussions of the past three years, our objective has been to shape a close and enduring partnership between the United States and Panama in maintaining an open and efficiently operated canal. That is the concept which underlies the treaties you have before you today.

The partnership envisioned in the new treaties has three aspects:

The United States and Panama will be partners in the operation of the Canal through the end of this century. During this period the United States will continue to shoulder the responsibility of managing the canal enterprise, building on a tradition of safety and reliability developed in over sixty years of experience. At the same time, we will be preparing Panamanians to carry on this tradition after the year 2000.

The United States and Panama will also be partners in protecting the Canal. For the duration of the Panama Canal Treaty, the United States will have the primary responsibility for defense of the waterway and will retain bases and troops in Panama for that purpose. Panama will also contribute forces to canal defense. While the forces of the two countries will work in coordination, they will retain their separate lines of command. We will be able to act unilaterally to maintain canal security if need be.

Finally the United States and Panama will share a long-term responsibility for maintaining the Canal's neutrality. The United States role in assuring neutrality will continue for as long as the Canal remains in operation-even after manage ment of the waterway passes to Panama.

Let me now explain more specifically how the United States-Panamanian partnership in operation of the Canal will function.

The Panama Canal Treaty provides for the creation of the Panama Canal Commissioner, which will manage and operate the Canal through December 31, 1999. The Commission, which will replace the existing Panama Canal Company, will be a United States Government agency constituted in accordance with legislation to be sought from the Congress.

The Commission will be supervised by a nine-man Board consisting of five Americans and four Panamanians. The Commission's executive officers will be an Administrator and a Deputy Administrator. Until 1990 the Administrator will be an American and the Deputy Administrator a Panamanian. After that time, the Administrator will be Panamanian and the Deputy, American.

The United States will appoint all officials of the Commission, including the Administrator, Deputy Administrator, and the nine Board members-Panamanian as well as American. The Panamanian appointees will, however, be proposed by Panama.

United States control of Canal operations throughout the treaty period is fully assured. The United States will have a majority on the Commission Board; it will appoint Commission officers; it can remove the Commission executive officers at will. Most importantly, the ssion will operate in accordance with United States law.

At the sa... time, the participation of Panamanians at the highest levels in the Canal enterprise both as Board members and executive officers-will permit Panama to attain the managerial expertise to operate the Canal after the year 2000. When Panama assumes responsibility for canal operation, Panamanians will have had the benefit of twenty years of involvement in the direction of the Canal enterprise.

The Treaty grants to the United States the rights needed to carry out its responsibility for operating the Canal. These include the authority to establish and collect tolls, make and enforce rules pertaining to navigation and marine traffic control, and regulate planning relations with employees. The Treaty also grants the United States the use of all lands, waters and facilities required for Canal operation. The areas and facilities reserved for this use and specifically identified. They include the Canal itself and related installations.

The Panama Treaty encourages continuity and quality in the Canal work force. The provisions governing employees are designed to encourage experienced personnel to remain with the Canal under the new Commission. Salary levels, and the terms and conditions of employment, will remain generally as favorable as they are

now.

An important difference for employees will be the change from United States to Panamanian jurisdiction in what is now the Canal Zone. For the United States employees-most of whom reside in the Canal Zone and who will therefore be most deeply affected by the shift-the treaties provide special guarantees which commit Panama to apply specified procedural standards in criminal cases involving United States citizen employees. In addition, an agreed minute provides that Panama, as a matter of general policy, will in such cases, transfer jurisdiction to the United States at the latter's request.

As with management, there is provision for development of a qualified Panamanian work force to man the Canal enterprise. In hiring new employees the Panama Canal Commission will give preference to qualified Panamanians. The Commission will also provide training programs to develop Panamanian workers with all the requisite skills needed by the Canal enterprise. During the more than two decades of the Treaty period, it should therefore be possible to build up a fully qualified Panamanian work force. We, of course, start from a strong base. Seventy-four percent of current Canal employees are Panamanian.

A sound financial structure is also important to the success of the Canal enterprise. We have kept this objective very much in mind in working out the economic arrangements under the new Treaty.

At the start of these negotiations-in the 1974 Kissinger-Tack Joint Statement of Principles-both countries agreed that Panama should receive "a just and equitable share of the benefits derived from the operation of the Canal in its territory". In line with this principle the United States consistently maintained during the negotiations that payments to Panama for its contributions to the Canal enterprise should be drawn entirely from Canal revenues-that is, that the payments should reflect the Canal's economic value as measured by its revenue-generating capacity. Panama initially sought much larger payments, which far exceeded what could be financed by Canal earnings.