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Mr. LAXALT. Mr. Chairman, I am pleased to appear before this distinguished committee to offer my views on the proposed Panama Canal treaties. Let me say at the outset that I oppose these treaties and I intend to vote against ratification when they are submitted to the Senate.

My objections range from what the treaties represent to specific problems with what they actually say. In addition, I am quite concerned about how the Carter administration is going about selling them to the American people.


The proposed treaties pose a grievous risk of loss within 22 years and constitute a certain loss after that time of a vital strategic and economic asset for the United States. To my mind, they also set a defeatist tone for our overall foreign policy which is unworthy of our people.

For me, the crucial question to be considered in assessing the treaties for possible ratification is one of trust. In hard practical terms, how much confidence should we as one Nation put in even the most solemnly pledged word of another nation when our vital national security assets are at stake? And, in this case with respect to Panama, does the nature of its government and the character of its leader add credence to the proposed undertaking?

Mr. Chairman, I suggest in this uncertain world that we need to be very careful in selecting those upon whom we rely in basic security matters. What is more, insofar as international partners are concerned, the present Panamanian government is hardly one in which I would repose a lot of confidence much less the guardianship of a vital U.S. asset.

We must remember as we consider these treaties that in the international arena each sovereign state is the ultimate judge of its own actions. We can and we should discuss in detail precisely what is in the treaties. But, we also need to look beyond the treaty language. We need to evaluate above all the credibility of the present Panamanian government.

How close is General Torrijos to Havana and Moscow? How secure is his tenure? Is he likely to demand rapid renegotiation before the ink is dry on these pacts? Would his potential successors? As a law-abiding Nation, we tend too frequently to assume that the word of other nations is as good as our own once pledged. Many times it is. But memories of Yalta, Potsdam, and Suez, should teach us to look beyond the specific language in international negotiations to the character of our potential partners before trusting them with important assets under even the most tightly written treaty. I suggest, Mr. Chairman, that General Torrijos' Panama will fail to withstand this test if this Committee chooses to apply it with its customary rigor.

As important as the credibility of the Torrijos regime in assessing the context of the treaties is the message which Senate acceptance of them would send to our allies and adversaries around the world. I agree fully with Secretary Vance. who said in his statement opening these hearings, "How we respond to an issue such as the Panama Canal will help set the tone for our relations with the rest of the world for some time to come."

Where I differ with the Secretary, of course, is in the kind of tone which I believe these treaties set for our foreign policy. In my judgment, the domestic debate on the acceptability of the treaties is between those who see them as an expression of historical generosity and those who view them as a rather abject lesson in capitulation. I am afraid that to me they represent much more of the latter and as such are decidedly unworthy of our people.

Since the end of World War II, the United States has played an active role in maintaining the balance of power throughout the world. Out of a renunciation of prewar isolationism came Anzus, NATO, bilateral relations with Japan, Taiwan, and Israel; all of which have served our Nation very well.

In my judgment, the great architects of post-war U.S. foreign policy, General Marshall, President Truman, and Senator Vandenberg, are owed a real debt of gratitude for this. They recognized that pre-war isolationism was not healthy either for this country or the world at large. They knew that our prosperity, our security, and even the future of our democratic institutions were all intimately bound up with the fate of other democratic nations.

I personally feel that the Panama Canal treaties pose a direct threat to the multilateral security structure created by these far-seeing visionaries. Not nec

essarily in isolation, but as part of a larger mosaic of U.S. hesitancy and withdrawal, serious questions will sonner or later occur to our allies and essential confidence will be impaired. Because it is this confidence which binds our security structure, that structure can only be impaired when serious discussion begins to de-recognize Taiwan, when proposals are made to abandon development of important strategic missile systems, and now when we propose to give away an important piece of real estate for the pure and simple reason that when push comes to shove, we do not think we can hold it?

To me this is precisely what the proponents' position boils down to. They cite fears of sabotage, guerrilla warfare and the alienation of Latin American opinion. The military leaders among them even draw distinctions between concepts of possession and use of the Canal. But, the essence of the proponents' position is that because the United States is not physically able to maintain its sovereignty over the Canal Zone, we should relinquish it before it is taken away from us.

This to me is a rather sorry spectacle. Although Santayana did say that those who do not learn from history are condemned to repeat it, I believe that we should not be frightened into giving up important strategic assets by scary specters of our own creation.

The violence argument is thus worthy of detailed comment. Ambassador Linowitz stated it in perhaps the clearest way when he said in a Voice of America broadcast:

"Expectations have been raised so high in Latin America that failure to get the treaties ratified could bring a whole range of consequences including violence."

I do not believe that the issue of potential violence should be ignored, but I do feel that we need to inquire closely as to its origins. To me, the treaties represent the worst possible way of dealing with potential security threats to the Canal from within Panama. The expectations of Panamanian extremists have certainly been raised by the prospect of taking over the Canal. But treaty proponents need to ask themselves whether those expectations will be satisfied by asking extremists to wait 22 years, or whether violence and sabotage are now possible, irrespective of Senate ratification, simply because of the atmosphere of heightened expectations which the treaties create without really satisfying.

In view of this tinderbox situation, I see Senate refusal to ratify as providing at least some deterrence to violence by demonstrating that the power of the United States remains behind its legitimate interests. Ratification of a half-way house treaty, on the other hand, because it represents a clear capitulation under threat of force without satisfying extremist expectations, would be a signal to potential rioters and saboteurs that they need not wait 22 years. All they need do is push just a little harder because the United States would have clearly demonstrated its willingness to treat with violence. Then it would be open season for extremists to attack not only the Canal but the property and persons of U.S. nationalists throughout Latin America.

The Administration's eagerness to conclude a Canal agreement, under these circumstances, is of serious concern to me. A fundamental decision was made at the end of World War II that the United States could not retreat into itself and maintain its security unilaterally for long. Granted, there is a certain weariness resulting from a prolonged land war in Asia. But, that weariness has not occasioned any lack of will among our people to maintain U.S. sovereignty in an area much closer to home: Quite the contrary. Recent polls indicate that a vast majority of the American people favor keeping the Canal.

In truth, the weariness is on the part of this Administration. I believe our people without being bellicose, do want to play an active role in the world. I believe our people do recognize certain areas beyond our borders as vital to our national interests. And, I think they will decisively reject a foreign policy which falls short of their standards. President Carter has promised to give this Nation a government as good as its people, but his Panama Canal treaties simply fail to measure up.


The terms of the treaties are no better than the overall tone which they set for American foreign policy. I am opposed to the front-end concession of the key principle of sovereignty. I believe the rapid turn-over of crucial support services to the Panamanians bodes ill for the effective operation of the Canal. I think the human rights of Americans left in the Zone and our ability to guarantee the neutrality of the Canal are inadequately protected. And, it is to

me an absolute scandal that we are proposing to pay the Panamanians to take the Canal off our hands.

1. Sovereignty

The main purpose of the treaty is hardly concealed. The preamble to the agreement opens by "acknowledging the Republic of Panama's sovereignty over its territory." Quite clearly at the very core of the nature of the present relationship between the United States and the Panama Canal is our own sovereignty over the Canal and Canal Zone. In my judgment, it would be bad enough if this new treaty confined itself to passing sovereignty to the Panamanian government. But, as I read the existing language, it recognizes that Panama already has sovereignty. Thus, the Panamanians could presumably exercise their right to expel the United States from their country whenever they desire. Accordingly, we are not only giving away our Canal, we are asserting that we have never had it.

2. Effective Canal operation

Despite some obvious disputes over the running of the Canal, particularly reflected in demands by Panama over the years for more revenue and control of the Canal, nearly everyone agrees that the Panama Canal Company has operated an extraordinary safe, fair, and efficient operation. It has made a major contribution to the development of world trade and maintained our own security interests in the Western hemisphere.

In scrutinizing the terms of the new agreement, I cannot help but wonder whether the operation will continue in the same equitable and efficient manner in the future. Article X requires that the American work force must "within five years *** be at least 20 percent less than the total number" of those working there at present. And, under section IV of the same article, new non-Panamanian employees can only work for terms of five years duration (aside from some special circumstances). Thus, discrimination is mandated in the treaty against the very personnel whose qualifications are necessary for the continued operation of the Canal.

Quite simply, Panama does not now have, and cannot have within the short period of time required, the skilled personnel to fill adequately the jobs of those who will leave their present jobs, whether voluntarily or under duress. Jobs such as the ships' captains that navigate the vessels through the Canal now require twenty years of training and experience. Panama does not have such qualified people. At present, only two out of the two hundred ships' captains are Panamanians. Until recently, no school even existed in Panama to train ship's captains and the country has virtually no navy. Nonetheless, the treaty requires that Panama assume control of an increasingly large portion of the skilled jobs in the operation of the Canal.

To make matters worse, the United States does not even have the option of building an alternative Canal if the proposed arrangement with Panama does work out in practice. Under Article XII, the United States is prohibited from negotiating "with third states for the right to construct an interoceanic canal

in the Western hemisphere" without the consent of the Panamanian goyernment. Thus, regardless of how poorly this agreement may work out, Panama holds an absolute veto power over the United States pursuing an alternative route for the next 22 years.

3. Human rights

The worst fears of the workers who now live in the Panama Canal Zone are fully realized under the terms of the proposed treaty. In all the discussion of alleged grievances and rights of Panama, we have curiously ignored the rights of the American citizens who live in the Canal Zone. In the treaty, we consciously expand Torrijos' authoritarian rule to include the Zone without ever raising a question about the abysmal human rights record of this regime and its consequences for the Americans who live there.

Under article XI, section 2, Panama does permit the United States to continue to have the "primary right to exercise criminal jurisdiction over United States citizens employees" of the Canal, their dependents and other American military forces. But this protection is limited to only certain areas and, most importantly, lasts only for the transition period of thirty months. After this period of time, these people fall completely under Panamanian legal jurisdiction. The human rights question must be squarely faced. The Zonians have lived under the mantel of freedom provided by the United States in the Panama

Canal Zone. Are they now to be abandoned? Simply in anticipation of the new agreement, many employees have already left the area and in a three year period this emigration could turn into a flood.

One specific provision of the treaty reveals most conspicuously the rapid deterioration of the rights of Americans remaining in Panama. Under Article V, rather innocuously titled "Principle of Nonintervention", American nationals must "abstain from any political activity in the Republic of Panama as well as from any intervention in the internal affairs of the Republic of Panama". This requirement appears rather reasonable until one realizes that under the treaty the definition of Panama includes the Canal Zone area where these people live and work. Naturally, the Republic of Panama will have the right to determine what constitutes intervention and thus the definition could easily be broadly construed to include even union activities and ordinary grievance procedures, or any kind of public or private meetings even in one's own home.

4. Security guarantees

Presumably, to protect the United States' vital security interests, a separate treaty provides for the permanent neutrality of the Canal. Thus far, this entire section has been enveloped in a conflict of interpretations between American and Panamanian negotiators. If disputes have arisen before the agreement is even ratified, this certainly bodes ill for its prospective implementation.

In the discussion thus far concerning American rights under the Permanent Neutrality Treaty, the Panamanians have made a much more convincing case for their position. Rather than a genuinely joint declaration, the Panamanians have insisted that since the main treaty acknowledges their sovereignty over the Canal, they alone can declare the neutrality of the waterway. And, under Article I of the second treaty, the language indicates only that "The Republic of Panama declares that the Canal . . . shall be permanently neutral". Thus, if Panama alone can declare neutrality, then unless other specific language indicates otherwise, the United States has no right under the treaty to proclaim unilaterally a threat to that neutrality and intervene to thwart such a threat.

In testimony before this Committee last week, Article IV of the neutrality treaty has been cited as a basis for the American right of intervention. This article does allude to both the United States and Panama agreeing "to maintain the regime of neutrality established under this Treaty". The last four words of this quote clearly mean the kind of neutrality that Panama has declared already in the treaty and not an American right to determine this. Thus, it is entirely understandable that the chief Panamanian negotiator has told his own national assembly that "The treaty does not establish that the United States has the right to intervene (that is send in troops) in Panama." Similarly, earlier this year, General Torrijos himself stated that after December 31, 1999, "the duties and responsibilities will be assumed by our country solely and exclusively." The language of the Panamanian view of what this agreement does could hardly be more specific.

On this point, as well as many others, the most lucid discussion that has thus far appeared of the nature and direction of the negotiations has derived from the Panamanians. They have indicated that the original language proposed by American negotiators was unacceptable to them and, ultimately, on the crucial issues they have prevailed. I cannot help but conclude, as the Panamanians have, that the United States under the terms of the Permanent Neutrality Act has sacrificed all meaningful rights to maintain the security of the Canal.

5. The high cost

While most Americans oppose giving the Canal to Panama, they are literally livid at the prospect of paying Panama to take the facility off our hands. Thus, the economic arrangements require special attention by this Committee and some plausible justification must be provided to explain why, in the course of transferring this multibillion asset to Panama, we must at the same time provide for payments to Panama of upwards of $50 million per year.

Of course, under the language of the treaty, the United States does not directly pay this money to the Panamanian government, but the net result is the same. Under Article XIII, dealing with the Economic Participation by the Republic of Panama, the agreement provides for Panama receiving $0.30 per ton for each vessel transiting the Canal. Moreover, five years after the new treaty goes into effect, this figure will be adjusted upward each 2 years to reflect changes in the American wholesale price index.

Some have contended that this provision_places a ceiling on the amounts that the tolls may rise for the next 22 years. But, more likely, the effect will be a rising floor for future toll increases. Coupled with the per ton figure, the United States also quadruples the annuity payment to Panama to $10 million and promises another $10 million if Canal revenues exceed expenses. This last provision may seem to provide an incentive for the efficient operation of the Canal, but more likely, this will simply encourage a rise in tolls that will permit the $10 million to be extracted.

All of this money derives from the revenues collected by the new Panama Canal Commission. The estimates of the total amount varies depending on the volume of cargo. But, on the basis of last year's volume of 117 million tons of cargo, this would have meant approximately $5 million, or about 20 times as much as Panama receives under the 1903 treaty. If the Canal has its anticipated rise in traffic this coming year, but still runs a deficit, this figure would rise to over $50 million.

In order to compensate for this huge new expenditure by the operators of the Canal, Ambassador Linowitz has already indicated that tolls will have to rise by 25 percent to 30 percent upon ratification of the treaty. This would represent the single largest increase in tolls since the Panama Canal began operations in 1914. The rise relates largely to compensation being provided the Panamanian government. But, as indicated in the analysis above, probably larger incentives will have to be provided to skilled workers to remain in Panama under the new treaty.

Despite the fact that the revenues going into the Panamanian treasury derive from the general operation of the Canal, the actual expense shall be borne by those ships that transit the Canal and through them the producers and consumers of the goods shipped. This could have severe repercussions on some products, such as American agricultural goods being exported from the Gulf Coast to the Orient or oil flowing from Alaska to our Gulf Coast. Therefore, although the payments to Panama are indirect, the American taxpayer will bear much of the burden of the increase which presumably will rise each year to the indexing procedures.

Overall this constitutes a radical alteration of the concept of the Panama Canal. While the United States has always viewed the Canal as facilitating world commerce, the Panamanians clearly view the waterway as their own OPEC in miniature, their monopoly over travel from one ocean to the other. And, given the veto power they hold over the American right to negotiate building another canal, Panama can effectively stymie any prospective competition.

Having expended an estimated $7 billion over the past 74 years in order to bring into existence and operate the Canal and all its related facilities, the American people have a right to ask why they must pay to have this enormous asset, run so efficiently and fairly for so long, taken off their hands by the Panamanian government. This is particularly true when sales of only several million dollars to other nations in Latin America have been suspended due to criticisms of the nature of their government.

Yet, with respect to Panama, no concern surfaces over the nature of the military dictatorship in the country that the United States will in effect be rewarding with one of the largest gifts ever bestowed voluntarily upon another nation. If the government of Panama appeared as a reliable friend of the United States, perhaps some justification for this enormous behest might be offered on foreign aid grounds. Instead, the Torrijos regime has constantly extolled Fidel Castro as a great Latin American leader and proceeded on its own social revolution that has substantially destroyed the Panamanian economy. In my judgment, if these treaties were to be ratified, the United States would be rewarding the wrong government, in the wrong place, at the wrong time, and in the wrong


The sales job

In addition to my concerns about what these treaties represent and what they say, in closing, I would also like to express my concern about the manner by which they are being sold to the American public. Governor Reagan rightfully termed the whole affair a "medicine show". And, I can only accuse President Carter's chief political strategist, Hamilton Jordan, of understatement when he told the Baltimore Sun: "We are going to spend a tremendous amount of political capital to get the treaty ratified."

I have found one of the most intriguing developments resulting from the Panama Canal treaty issue to be the negative approach most proponents have

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