by students and others will make atmosphere decidedly unfavorable to further negotiations of any kind for several months.

HALL

711F.1914/12-2347: Telegram

The Acting Secretary of State to the Embassy in Panama

US URGENT

NIACT

WASHINGTON, December 23, 1947.

573. Following statement has been released to press: "According to official reports the National Assembly of Panama has rejected the ratification of the defense sites agreement signed on December 10, 1947 by the Governments of the Republic of Panama and the United States of America. This agreement was reached in accordance with the 1936 Treaty of Friendship and Cooperation providing for joint responsibility of the two countries for the effective protection of the Canal.

Throughout the period of more than 15 months during which negotiations for a defense sites agreement have taken place the United States Government has endeavored at all times to share with the Government of Panama its estimates of the minimum defense needs of the Canal. It has been the constant aim of the United States negotiators to consult with the appropriate Panamanian authorities in all frankness with respect to the considerations underlying these estimates which have provided the basis for the recent defense proposals of this Government.

Substantial and repeated concessions were made during the lengthy negotiations on the agreement in an attempt to reconcile Panamanian desires with the defense requirements of the Canal. The negotiations were concluded on December 10 by the signature of the agreement in terms which were intended to take into account the legitimate interests of both countries.

In accordance with oral statements made to the Panamanian Government in the course of the negotiations, the necessary steps will be taken immediately with a view to evacuation of all sites in the Republic of Panama outside the Canal Zone where United States armed forces are now stationed. This withdrawal will be completed as quickly as possible consistent with the number of personnel and the amount of materiel involved.

Failure to conclude an agreement will not, of course, affect the normal friendly relations between the two countries."

LOVETT

ian National Assembly's Rejection of the 1947 Agreement To Extend U.S. Occupancy of Defense Sites in Panama*

THE PANAMA BASES

This report is based upon an inquiry into the circumstances and the effects of the rejection by the National Assembly of Panama of an agreement to permit extended use by the United States of 14 bases on Panamanian soil. The inquiry was undertaken by Representative Mike Mansfield, of Montana, a member of Subcommittee No. 1-National Security, and No. 11-Western Hemisphere, upon instructions from the chairman of the Committee on Foreign Affairs, Representative Charles A. Eaton.

The views of the immediate situation herein recorded were developed through personal observation and conversations in the Republic of Panama and the Canal Zone.

I. ANTECEDENTS OF THE UNITED STATES-PANAMA DEFENSE BASE AGREEMENT OF 1942

A. THE TREATIES OF 1903-1904

The unratified treaty with Colombia, 1903.-The rejection of the agreement in question brings into a new phase a sequence of legal and political relationships with Panama dating back 45 years.

It was on January 22, 1903, that the United States Government signed with the Republic of Colombia a treaty by which the United States was to be granted a 100-year lease on a zone of land 10 kilometers wide across the Isthmus of Panama. This treaty, known as the Hay-Herrán treaty, after its two negotiators, the United States Secretary of State John Hay and the Colombia Chargé d'Affaires Tomás Herrán, was rejected by the Colombian Senate on August 12, 1903.

The apparent motive for the rejection lay in the desire to gain for Colombia more favorable financial considerations than the $10,000,000 cash and an annuity of $250,000 in gold to begin 9 years after ratification. The real gain for Colombia would have been the immeasurable, ultimate advantage of a position on one of the world's great crossroads. This advantage was forfeited in an attempt to drive a better bargain in the measurable and immediate terms of cash.

The treaty with Panama, 1903.-On November 3, 1903, the Colombian state of Panama, thus deprived of an opportunity to become the scene of a great commercial watercourse, revolted. Ten days later the United States extended recognition to the insurgent government of Panama. Philippe Bunau-Varilla, a Frenchman who had been chief engineer for the French company which had previously bogged down in a project of digging a trans-Isthmian canal and who had been

*The Panama Bases: An Inquiry into the Circumstances and the Effects of the Rejertion by the National Assembly of Panama of an Agreement To Extend United States Occupancy of Installations Required for Defense of the Canal Zone, Report by Hon. Mike Mansfield. 80th Congress, 2nd Session, Subcommittee Print. Washington, U.S. Govt. Print. Off., 1948, pp. 1-8.

one of the primary leaders in the Panamanian revolt for independence, was appointed first Panamanian Minister to Washington. He and Secretary of State Hay proceeded to draw up a new treaty giving the United States the right to construct a canal across the Isthmus. This was signed on November 18, 1903, and after exchange of ratification, was proclaimed February 26, 1904.

In a message to Congress on December 7, 1903, President Theodore Roosevelt summarized the provisions of this treaty as follows:

By the provisions of this treaty the United States guarantees and will maintain the independence of the Republic of Panama. There is granted to the United States in perpetuity the use, occupation and control of a strip 10 miles wide and extending 3 nautical miles into the sea at either terminal, with all lands lying outside the zone necessary for the construction of the canal or for its auxiliary works, and with the islands in the Bay of Panama. The cities of Panama and Colon are not embraced in the Canal Zone, but the United States assumes their sanitation and, in case of need, the maintenance of order therein; the United States enjoys within the granted limits all the rights, power, and authority which it would possess were it the sovereign of the territory to the exclusion of the exercise of sovereign rights by the Republic. All canal and canal property rights belonging to Panama and needed for the canal pass to the United States, including any property of the respective companies in the cities of Panama and Colon; the works, property, and personnel of the canal and railways are exempted from taxation as well in the cities of Panama and Colon as in the Canal Zone and its dependencies. Free immigration of the personnel and importation of supplies for the construction and operation of the canal are granted. Provision is made for the use of military force and the building of fortifications by the United States for the protection of transit. In other details, particularly as to the acquisition of the interests of the New Panama Co. and the Panama Railway by the United States and the condemnation of private property for the uses of the Canal, the stipulations of the Hay-Herran treaty are closely followed, while compensation to be given for these enlarged grants remains the same, being 10 millions of dollars payable on exchange of ratifications; and, beginning 9 years from that date, an annual payment of $250,000 during the life of the convention.

B. PROBLEMS UNDER THE BASIC TREATY WITH PANAMA

Special provisions of Panamanian Constitution.-The Constitution of Panama, put into effect in 1904, contained two articles germane to American rights in the Panama Canal.

Article 3 thereof provided:

The territory of the Republic remains subject to the jurisdictional limitations stipulated, or which may be stipulated in public treaties concluded with the United States of North America for the construction, maintenance, or sanitation of any means of interoceanic transit.

The Government of the United States may intervene in any part of the Republic of Panama to reestablish public peace and constitutional order in the event of their being disturbed, provided that that Nation shall, by public treaty, assume or have assumed the obligation of guaranteeing the independence and sovereignty of this Republic.

Special rights in Panama City and Colon.-Panama's two principal cities were entirely surrounded by Canal Zone territory until 1914, when Panama City was given a corridor to the other territory of the republic. Since these cities also formed urban areas contiguous with the chief American settlements in the zone, conditions within them affected the welfare of workers in the Canal Zone.

Consequently, the Hay-Bunau-Varilla treaty had authorized the United States to intervene if necessary to maintain public order in Colon and Panama. This right was exercised on only a few occasions, but the United States used its good offices frequently in internal

political disputes in the early days of the Republic because of threats of disorder. In accordance with the rights in connection with the sanitation of Panama City and Colon granted by the Canal treaty, the United States has taken charge of the public health work there since 1905.

The measure of United States authority.-The character of the rights enjoyed by the United States in the Canal Zone has given rise to prolonged dispute. The United States has insisted upon a literal interpretation of article 3 of the Hay-Bunau-Varilla treaty, which grants the United States within the zone all the powers, rights, and authority which it would possess if it were the sovereign of the territory. Panama has maintained that these rights were granted only for the construction, maintenance, operation, sanitation, and protection of the Canal. Consequently, Panama has objected to any acts considered not necessary for these purposes.

The United States had hardly taken formal possession of the Canal Zone when a major dispute arose with Panama. The apparent exercise of sovereignty by the United States Government in the · establishment of ports of entry, customhouses, tariffs, and post offices in the Canal Zone aroused a storm of protest from Panamanians. This subsided after December 1904, when Secretary of War William Howard Taft visited the isthmus and, after observing the situation personally, issued an order limiting importations at zone ports to supplies for the Canal and persons connected with it or ships in passing through, and to goods in transit. In return, Panama made certain concessions, chiefly with respect to customs duties. This understanding, although originally intended to be in effect only during the construction period lasted until 1924. It laid aside but did not settle the underlying question of the scope and nature of United States authority in the zone. Minor disputes still occurred frequently, especially in connection with the operation of American commissaries in the zone. Panamanian merchants objected as they still objectto the presence of commissaries which sell goods to United States military personnel and to civilian employees, both Americans and Panamanians, at favorable prices.

C. ATTEMPTS AT SETTLEMENT, 1924-39

Events of 1924-36.-A new treaty was signed in 1924 in an effort to make a permanent arrangement and settle other outstanding questions, but internal political complications in Panama prevented its ratification. This treaty would have perpetuated the restrictions which the United States had already imposed upon itself in connection with commercial operations in the Canal Zone, and would have provided for territorial adjustments and for cooperation in defense of the Canal.

Devaluation of the dollar in 1933 led to another difference between the United States and Panama. Panama in three successive years refused to accept payment in devalued currency and demanded. payment in terms of the old gold dollar.

The treaty of 1936.-A treaty to adjust the basic differences between the two nations was signed March 2, 1936. It represented fundamental concessions to Panama's point of view. It abrogated the guarantee of Panama's independence and the right of the United States to intervene in Panamanian territory. It also increased the amount of the Canal annuity to 430,000 Panamanian balboas or their

3

equivalent in United States currency. This met Panama's demand that the annuity be paid in gold rather than devaluated dollars.

The principle of joint action and consultation was substituted for the former privilege of unilateral action by the United States. The treaty provided that in case of emergency both Governments would take such measures of protection and defense as they might consider necessary for the protection of their common interest. The treaty provided also that

any measures, in safeguarding such interests, which it shall appear essential for one Government to take, and which may affect the territory under the jurisdiction of the other Government, will be the subject of consultation between the two Governments.

This treaty was assented to by the United States Senate after a delay of 3 years and was finally proclaimed July 27, 1939.

A new basis.-The principal reason for the 3-year delay in the United States Senate was a doubt in the minds of some Senators as to whether this treaty would adequately protect the United States' major interests in the Canal area.

These doubts were removed by a clarifying exchange of notes between the Department of State and the Panamanian Embassy in Washington early in 1939. The Panamanian Government stated that in cases of extreme emergency consultation between the two Covernments as to desirable measures might take place after rather than before the taking of necessary measures of defense by the United States. It was also stated that

the holding of maneuvers or exercises by the armed forces of the United States of America in territory adjacent to the Canal Zone is an essential measure of preparedness for the protection of the neutrality of the Canal Zone.

Of this new treaty, Philip W. Bonsal, Deputy Director of the Office of American Republic Affairs of the Department of State, wrote in the Department of State Bulletin, January 29, 1944:

Fundamentally, the new treaty was based upon the willingness of the two Governments to cooperate, as far as it is feasible for them to do so, for the purpose of insuring the full and perpetual enjoyment of the benefits of all kinds which the Canal should afford the two nations that made possible its construction as well as all nations interested in world trade. **Thus Panama became a partner in the Canal enterprise in its largest sense instead of a more or less passive beneficiary in some respects and a victim in other respects of the bisection of Panamanian territory by the Canal Zone.

II. THE AGREEMENT OF 1942 AND ITS SEQUEL

A. COOPERATION DURING WORLD WAR II

The need of stronger defenses.-The more friendly relationship established between the United States and Panama as a result of the 1936 treaty bore fruitful results during World War II. United States military and naval authorities became convinced that defense of the Panama Canal could not be assured solely by installations located in the zone.

A plan of defense entailing the occupation of many points in Panamanian territory for airfields, gun emplacements, searchlight_locations, detector stations, and the like, was submitted to the Panamanian Government. In March 1941, the President of Panama indicated willingness to make the needed defense sites available to the United States. Because of the emergency, it was agreed that the sites should be turned over before the conclusion of an agreement