would be less vulnerable to attack or sabotage, would cost about $2.8 billion to build and that a third set of locks would cost about $1.5 billion.

I will defer to others more expert than I your question about the legal aspects of ceding U.S. controlled territory to Panama. We plan only to release certain land and water areas in the Canal Zone not needed for canal operation and defense but useful in the agricultural, industrial, and urban development of Panama. The areas being considered have been selected with the concurrence of the Department of Defense and the Panama Canal Co.

Panama seeks the application of its laws to various activities in the present Canal Zone. Certain jurisdictional rights and activities, including commercial operations, not necessary for the administration, operation and defense of the canal, can be transferred to Panama without adversely affecting the U.S. interests. Panama today can provide nearly all the commercial services essential to the health and welfare of the personnel who operate the canal. Right now some 5,000 U.S. citizens live in the Republic of Panama. Some are engaged in a wide variety of private business activities and others commute daily to jobs in the Canal Zone. They are fully subject to Panamanian law and police jurisdiction and have experienced no significant difficulties. Throughout the world tens of thousands of U.S. Government employees live and work satisfactorily under the legal jurisdiction of foreign governments. The United States will continue to have adequate protection of the rights of its canal employees under a new treaty, and I assure you that we will not negotiate away legal rights essential to the operation and protection of the canal. Our military personnel will be protected by a Status of Forces Agreement comparable with other such agreements elsewhere in the world.

Commercial activities currently conducted by the Panama Canal Company will gradually be phased into private operation as arrangements can be worked out for their satisfactory conduct under Panamanian law. The United States will reserve the right to continue to conduct essential commercial services where satisfactory private operation can be arranged. Military commissaries and post exchanges will not be affected by the proposed changes.

Some piers we plan to turn over to Panama outright as proposed in 1967. We plan to turn over, inasmuch as the United States now controls all deep water port capacity in the Republic of Panama, and the United States needs for such capacity will be greatly reduced with the termination of canal company commercial activities. Pier capacity for military and canal administration requirements will be retained under U.S. control.

I will leave to my State Department colleagues the definitive answers to your question about the impact of the current Panama treaty negotiations on other Latin American countries. However, in the course of the recently completed Sea-Level Canal Study Commission investigation we did conduct an informal survey of Latin American attitudes toward the U.S. operation and defense of the Panama Canal and found general approval and general acceptance of the necessity for its continuation. The economies of many Central and South American countries are closely tied to the uninterrupted operation of the Panama Canal at reasonable tolls. There is considerable fear among

canal users in Latin America and worldwide that, without continued U.S. control, the canal might be operated to produce maximum revenues rather than as a utility serving world trade at reasonable tolls. On the other hand, there is widespread support in Latin America for Panama's efforts to obtain greater practical exercise of its sovereignty and to terminate the objectionable aspects of the U.S. presence in the Canal Zone, which is exactly one of the U.S. objectives in the current negotiations.

State representatives will deal with your questions about U.S. Canal Zone activities that Panama alleges to go beyond the authorizations of the treaty of 1903. I would like to say that in the current negotiations the Panamanians have indicated that they are willing to negotiate for continuation of the disputed activities. Their position is that the authority for the United States to conduct them must be clearly established in our new treaty relationship.

The Panama Canal is of great importance to world trade. The United States has always regarded its responsibility for its operation and defense as a responsibility to all canal users. Although 70 percent of canal cargoes in recent years has either originated in or been destined for the United States, these cargoes represented only 16 percent of the total U.S. ocean trade. On a relative basis, the canal is far more important to 10 other countries which have larger portions of their ocean trade passing through the canal. For the record, I have a table from the Canal Commission's report showing the use of the canal by each of the world's nations in terms of total tonnages passing through the canal to and from each country and the percentage of each country's total ocean trade that these canal tonnages represent. (The table referred to follows:)

Countries are ranked in accordance with total of origin and destination cargoes in fiscal year 1969, Canal percent of country's total oceanborne trade is based upon data contained in the United Nations Statistical Yearbook, 1970.

Mr. MUNDT. U.S. control and defense of a canal in Panama well into the next century is not at stake in the current negotiations. We are seeking a treaty arrangement with Panama that will insure the continuation of the U.S. presence in tranquillity. This means that this presence must not be imposed on an unwilling partner. It must be established on a mutually acceptable basis. We can afford to make adjustments in our treaty relations with Panama.

At present the most serious threat to U.S. interests in Panama is the unrest generated by treaty arrangements that in certain respects have become outmoded.

There should be no reason for Panama not to adhere to a new treaty far more beneficial to Panama than the current treaty. Panama's economic well-being is tied to efficient operation of the canal and the expenditures associated with the U.S. presence. Panama has not caused one act of sabotage against the canal in the 68 years since 1903. The canal is largely run by Panamanian citizens-11,000 of the 15,000 employees are Panamanian citizens-and the proportion will grow greater with the passage of time. Our military forces will remain on the scene. It is hard to conceive of future developments in Panama under the contemplated new treaty arrangements that could truly threaten the U.S. capability to control and defend the canal. It is far

easier to foresee difficulties if we refuse to meet reasonable Panamanian demands in a new treaty relationship.

Thank you.

Mr. MURPHY. Mr. Hurwitch?

Mr. HURWITCH. Mr. Chairman, Mrs. Sullivan, and gentlemen, I am pleased to have this opportunity to appear before you and to share with you the views of the Department of State with respect to our relations with Panama. In this opening statement, I shall deal briefly with those relations in a historic context in order to place the current canal treaty negotiations in perspective. While I shall also touch upon certain broad aspects of the negotiations, the negotiators themselves, as well as other representatives of the Departments of State and Defense, can more appropriately answer your technical questions in detail.

What is now the nation of Panama has had a long and colorful history in which its geographical location as a naturel crossroads has played the dominant role. Virtually from the time of its discovery it became the chief route of travel and transshipment between Spain and most of Latin America-and even onward to the Philippines. Formal U.S. interest in the area as a transit point dates from 1846, when we concluded a treaty with Nueva Granada (Colombia) granting us the right of transport across the Isthmus. There followed more than a half a century of dramatic developments-the construction by an American firm of the Panama Railroad across the Isthmus, the negotiation by the United States of various now nearly forgotten treaties relevant to the construction of an interoceanic canal, the loss of some $287 million and 22,000 lives in an unsuccessful French effort to build a canal-before Panamanian independence was proclaimed on November 3, 1903. Fifteen days later the Hay-Bunau Varilla Convention was signed in Washington between Secretary of State Hay and the French engineer-financier Bunau Varilla, who was the principal French agent charged with disposing of the French assets in the abortive canal endeavor, as well as Panama's first Minister of Foreign Affairs. The treaty, concluded before the arrival of Panamanian Commissioners who were supposed to participate in the signing, granted to the United States "in perpetuity the use, occupation, and control of a zone of land and land under water for the construction, maintenance, operation, sanitation, and protection" of a canal, with "all the right, power and authority within the zone which the United States would possess and exercise if it were the sovereign of the territory."

The 1903 convention and the agreements associated with it have formed the central core of our unique relationship with Panama ever since its founding and have constituted a built-in source of friction. As members of this subcommittee well know, the Canal Zone cuts through the center of Panama. On the Pacific side, Panama City, the capital, adjoins the zone, while the major city on the Caribbean is surrounded by the zone. One cannot cross from the eastern to the western half of the country without transiting the 10-mile-wide strip under U.S. jurisdiction.

A host of specific issues relating to the Panama Canal and the Canal Zone have troubled U.S. relations through the years. In 1936 and again in 1955 we entered into supplementary treaties designed to resolve some of them, but many continued to rankle. Chief among

these have been the U.S. treaty right to act as if sovereign in perpetuity, the amount-now $1.93 million-of annual direct compensation, and our possession of certain areas of land which Panama urgently desires for economical expansion and does not consider essential to the operation and defense of the canal. During 1962–63, representatives of Presidents Kennedy and Chiari discussed points of dissatisfaction, but growing frustration and emotional nationalism among Panamanians erupted in January 1964 in a 4-day riot on the Canal Zone borders in which 18 Panamanians and four American soldiers were killed, hundreds injured, and millions of dollars worth of property destroyed. Panama broke off diplomatic relations with the United States, charging us with acts of aggression, and took her case to the United Nations and the Organization of American States. In April 1964, the OAS announced that an agreement had been reached between the United States and Panama to reestablish diplomatic relations and to designate special ambassadors with sufficient powers to seek the prompt elimination of points of dissatisfaction, without limitations or preconditions of any kind. President Johnson appointed the distinguished former Secretary of the Treasury and Secretary of the Navy, Mr. Robert B. Anderson, as the Special U.S. Representative. Mr. Mundt has already told you in his opening statement of the three draft treaties which resulted from the 1964-67 negotiations. During the years 1965-70, Ambassador Anderson also headed the Atlantic-Pacific Interoceanic Canal Study Commission. After more than 5 years of study and investigation, the Commission concluded, inter alia, that current U.S. canal policy should not be made in the expectation that nuclear excavation technology would be available for canal construction; that the construction of a sea-level canal by conventional means is physically feasible; that the most suitable site for such a canal is on Route 10 in Panama, a few miles west of the present canal; that its construction cost would be about $2.8 billion in 1970 price; and that amortization might or might not be possible from tolls, depending on a number of future factors.

As you know, the President of Panama did not act to have the 1967 draft treaties ratified, and no action was taken on them by our Government. Panamanian attention was largely concentrated on domestic developments for a few years. After a long and bitter political campaign, Dr. Arnulfo Arias was elected President in May 1968 and inaugurated on October 1. On October 11, Dr. Arias was ousted by a coup a fate he had also suffered during his two previous presidential terms-and a military junta took over the Government of Panama. Following a period of some initial instability, the provisional junta government established itself firmly in power under the leadership of Brig. Gen. Omar Torrijos, Cammandant of the National Guard. After a study of the 1967 drafts, the provisional junta government rejected them and asked us to renew discussions for a new canal treaty.

The United States had no realistic choice but to agree to the renewal of negotiations. The canal issue in Panama is just as emotional and nationalistic an issue now as it ever was. In all fairness, it must be admitted that Panama has some reasonable grievances in connection with the present situation. This administration firmly believes that differences should be settled at the negotiating table if mutually satisfactory agreements can be reached. We fully recognize that the conditions which existed in 1903-—and Panamanians were dissatisfied