final result of the Panama Canal treaties-but I am sure there will be a good deal of flap about it for some time to some.

Thank you, Senator. I am sorry to have interrupted.

The CHAIRMAN. Let me say that Senator Percy was not able to be here yesterday, and he feels that he needs additional time.

Senator PERCY. I will just present one additional question, if I may.

HEARING PROCEDURE

Senator STONE. Mr. Chairman, if the Senator will yield, there is a live quorum call again and leadership has asked me to suggest to the committee that we designate the order of questioning and take turns questioning the witnesses under the 10-minute rule and all other committee members stay on the floor. Senator Baker particularly made that suggestion in order to avoid dilatory quorum calls while still allowing the committee to proceed.

The CHAIRMAN. Who wants the first 10 minutes?

Senator McGovern, are you ready?

Senator McGOVERN. (Nods affirmatively.)

Senator PERCY. I will finish my 3 minutes, and then I will go to the floor, Mr. Chairman.

The CHAIRMAN. The rest of us will go over and take our time as we can. I will go now.

DIVERGENT STATEMENTS CONCERNING CANAL DEFENSE

Senator PERCY. Secretary Brown and General Brown, I think that the first two questions have been answered very satisfactorily, and I would hope that those who asked them would agree. Mr. Wayne Parmenter wrote to me from Murphysboro, Ill.-I have picked out questions that are representative of hundreds of concerns, not just isolated questions-and asked this question:

Ambassador Bunker says that ratification will enhance our security, but one of the reasons he gives for giving the canal away is that we will not be able to protect it from attacks of radicals who are bent on putting the canal out of action. Then in the same breath, he says we will have the right to go in and protect the canal with our military forces if necessary. What kind of doubletalk is this? If we cannot defend it against the rebels in little Panama, how are we going to defend it after we have given away possession of it to Panama? It just doesn't make sense to me.

Does anyone want to volunteer to take that one on?
Secretary BROWN. You go ahead.

General BROWN. Senator Percy, I would have to state that I think the Joint Chiefs of Staff would respond with confidence that the United States can handle any problem that comes up in the Panama Canal Zone. It is not our inability to handle a threat from dissident elements in Panama who might threaten the Canal Zone or the canal itself, but rather we would avoid having to do so by these treaties through which Panama will have a stake in the operation of the canal, and I think the Panamanian Government would act in a totally responsible manner with us in trying to control such a situation. That would not be guaranteed today.

Senator PERCY. Thank you very much. When I come back from the floor in our second round, I will present equally perceptive questions

96-949-77-10

from citizens in Canton, Ill., from Chicago, Benton, Rock Island, Zion, Oak Park and Evansville, which I think will represent a crosssection of the Illinois electorate.

Senator BIDEN. Gentlemen, I am going to send all my mail to you to be answered also. [General laughter.]

AEI DEFENSE REVIEW ARTICLES

Senator McGOVERN. In the absence of Senator Sparkman, I don't know quite whom to address this Mr. Chairman request, but our colleague, Senator Case, referred to an article by Hanson Baldwin in the American Enterprise Institute Defense Review which he asked to be inserted in the record. I am sure that Senator Case would have no objection to inserting another article that appears in that same publication by Mr. Abraham Lowenthal in support of the treaty.

As a matter of fact, this is a debate in effect between Hanson Baldwin, opposing the treaty, and Mr. Lowenthal, supporting it. Mr. Lowenthal is a former director of studies at the Council of Foreign Relations. He now heads the Latin American program at the Woodrow Wilson International Center. I would ask without objection that the Lowenthal article also be printed in the record.

[The information referred to follows:]

[Reprinted from AEI Defense Review, published by the American Enterprise Institute for Public Policy Research]

THE UNITED STATES AND PANAMA: CONFRONTATION OR COOPERATION?

(By Abraham F. Lowenthal and Milton Charlton)

Suddenly, after thirteen years of desultory negotiations under three different administrations, the future of United States relations with Panama has become a cardinal issue of U.S. foreign policy. Two highly experienced and widely respected senior U.S. diplomats-Ellsworth Bunker and Sol Linowitz-are together conducting detailed negotiations with Panama's leaders. Soon-perhaps even before this essay is in print-they hope to hammer out a new treaty redefining the rights and duties of the United States in the Panama Canal Zone and establishing a sound basis for U.S. cooperation with Panama to defend, maintain, and improve the canal.

If the negotiations proceed successfully, the Carter administration will submit the draft treaty to Congress, which retains ultimate responsibility, on behalf of the American people, for shaping this country's stance toward Panama. The Congress will then have to choose between two different approaches for profecting U.S. economic, military, and political interests. One way is to cling-in the face of rising opposition from Panama, on the international scene, and even from within the United States-to the terms of the Hay-Bunau-Varilla Treaty of 1903 which grants to the United States in perpetuity exclusive jurisdiction over the canal and the adjacent zone. The other is to forgo a modern partnership between the United States and Panama so that the two countries together can protect an efficient, secure, and neutral canal. One path assures an era of bitter and continuing confrontation between the United States and Panama: the other way promises closer cooperation. The essential question is as simple as that.

Like his three predecessors in the oval office, President Carter has opted for a new relationship with Panama. Unlike his predecessors, however, President Carter-convinced that the issue can no longer be postponed-has accorded the Panama problem real priority. Even before taking office, Secretary of State designate Cyrus Vance singled out Panama as a significant issue. Ambassador Linowitz. well known as an ardent advocate of a new Panama treaty, was appointed special negotiator, thus conveying the new administration's intention to take this issue seriously. After President Carter's inauguration, the first meeting of the National

Security Council focused on Panama. Intensive negotiations, begun immediately, continue to receive presidential attention.

The new administration is not alone in recognizing the need for a revised Panama treaty. The New York Times calls it an "imperative for amicable U.S. relations with Latin America." Most other major U.S. newspapers agree. The respected Commission on United States-Latin American Relations identified Panama as "the most urgent issue" facing the United States in the Western Hemisphere. Business groups, including the National Chamber of Commerce and the Council of the Americas (representing some 220 corporations comprising about 90 percent of U.S. investment in Latin America), strongly favor a new accord. James J. Reynolds, president of the American Institute of Merchant Shippersthe institutional voice of the American flag commercial fleet-has warned that! failure to conclude a new treaty would be "catastrophic." And General George Brown, chairman of the Joint Chiefs of Staff of the U.S. Armed Forces, has urged the administration to "get on with the negotiations."

But the gathering consensus does not mean unanimity. Angry voices from various parts of the country, and from longtime U.S. residents of the Canal Zone itself, protest any proposed change in the 1903 treaty. They call for preserving intact the extraordinary privileges conferred on the United States by that treaty and suggest that any diminution of these rights would be costly or even dangerous. Both inside Congress and out, those who oppose a change in Panama have vowed an unrelenting battle against the proposed new pact.

Proponents and opponents of a new treaty with Panama agree that the issue is significant and that its time has come. They disagree considerably, however, about what is at stake and about how to protect U.S. interests. Few foreign policy issues have generated more myths or misunderstanding. Statements made in both political parties during the 1976 election campaign, when Panama was often discussed, confused more questions than they clarified. More careful exchanges (like ours with Mr. Baldwin in this issue of the AEI Defense Review) may help citizens decide for themselves.

U.S. PRIDE, PANAMANIAN HUMILIATION

Americans are brought up to think of the building of the Panama Canal as one of the most glorious chapters in our nation's history. We admire Theodore Roosevelt's audacity in deciding to "take Panama" while the Congress debated. We are told of the stirring victory of the Army Medical Corps against the deadly yellow fever carried by mosquitoes. We marvel at the engineering feats which finally made it possible for the United States to link the Atlantic and Pacific oceans across the narrow Central American isthmus. We learn of the hundreds of millions of dollars the United States has invested in building and maintaining the canal. We respect the hundreds of thousands of U.S. military men who have protected the canal over the years, keeping it open at all times, in peace and war. And we take pride in the positive impact the canal has had on America's prosperity and military might, on world trade, and on Panama itself.

The first step toward understanding the Panama problem is to realize that Panamanians learn a very different history. They are told that the United States seized the opportunity to build the canal through the heart of Panama's territory by combining brute force with political chicanery. They are taught that U.S. warships helped Washington get the terms it wanted in the 1903 treaty, drafted in Panama's name by a Frenchman of dubious motivation and loyalties. They are reminded that Secretary of State John Hay himself told the U.S. Senate that the treaty was "vastly advantageous to the United States and, we must confess... not so advantageous to Panama." They are told of Panama's many attempts, sometimes involving sacrifices and even deaths, to change the treaty's terms.

For Panamanians, the Canal Zone created by the 1903 treaty is a daily affront. Cutting a ten-mile-wide swath through the heart of Panama's territory, the Canal Zone carves out of that small country an area the size of Rhode Island, where the laws of the United States apply, where U.S. flags fly, where U.S. police patrol, where even the fire department is under U.S. jurisdiction. Panamanians

1 For a reliable and readable account of this period, see David McCullough, The Path between the Seas: The Creation of the Panama Canal, 1870-1914 (New York, 1977). Letter to Senator John C. Spooner, January 20, 1904, in the Hay Papers, quoted in Alfred L. P. Dennis, Adventures in American Diplomacy 1896-1906 (New York, 1928), p. 341.

think of U.S. military men not as heroes who defend the canal but as soldiers of an occupation force. American civilians in the zone are regarded not as those who keep the canal operating smoothly but as a pampered alien elite, fond of special privileges and disdainful of the natives.

For Panama, and for most of the rest of the world, the Canal Zone is a colony, a vestige of the era when great powers could at will set up non-self-governing territories abroad. For Panama, the Canal Zone is a source not of national pride but of national humiliation.

The central question for the United States in Panama is whether U.S. interests in the canal require Panama's continuing humiliation. Those who urge the United States to cling to the 1903 treaty think that there is simply no better way to protect this country's interests. Those who favor revising the 1903 treaty believe that the United States and Panama share the basic aim of keeping the canal open, secure, efficient, and neutral-and that U.S. interests and Panamanian dignity can, therefore, be reconciled through a new treaty recognizing Panama's sovereignty.

THE VALUE OF THE CANAL

What are U.S. interests in Panama and how important are they? What is at stake for the United States?

The tangible interests of the United States in Panama, economic and military, are real and significant. All too often, however, analysis of the precise nature and scope of U.S. interests, and how best to protect them, has been foreclosed by sweeping assertions that the canal and the zone are "vital" to this country. That may have been true once; it is not today, and it will be even further from reality in coming years. A meaningful discussion of how to defend U.S. interests in Panama should begin by defining the canal's current and probable future significance for the United States.

The main value of the Panama Canal has always been that it considerably shortens the distance for vessels crossing between the Atlantic and the Pacific oceans. A voyage from New York to San Francisco, for example, is shortened by almost 8,000 miles when the canel is used instead if the Cape Horn route. A trip from New York to Yokohama through the canal saves more than 3,000 miles compared with the route through Suez. The canal offers obvious economic advantages, therefore, in time, fuel, and money. Militarily, the shortcut through Panama enables the United States to transfer some of its naval combat forces and logistic support more readily from one part of the globe to another.

When the canal opened in 1914, these advantages were central to the prosperity and security of the United States. Prior to that time, international commerce had been forced to rely largely on the long and arduous Cape Horn route. The reduc tions in distance and in shipping time made possible by the canal meant dramatie savings in transport costs, which, in turn, spurred a major expansion of intercoastal and international commerce. The canal's annual traffic swelled from about 1,000 commercial transits in 1915 to over 14,000 a year by the early 1970s, carrying about 5 percent of the world's ocean-borne tonnage.

Even more important was the canal's contribution to the strategic mobility of U.S. naval forces. The celebrated sixty-nine-day dash of the battleship Oregon around the Cape to Cuba during the Spanish-American War had dramatized the need for a naval passage across the Central American isthmus. With American interests expanding in both Europe and Asia, the ability to shift the limited U.S. forces rapidly from one ocean to the other became imperative. As late as World War II this capacity meant a great deal: some 6,400 transits of the canal by U.S. and other allied combat vessels and some 10,300 by other military vessels saved the United States an estimated $1.5 billion, not to mention lives saved because the war was presumably shortened by the time advantage the canal I provided.3

But times have changed since World War II. Today, for example, commercial shippers can choose from a number of alternatives to the canal route. Air freight has become an increasingly attractive option for high-value goods of small bulk. With the development in recent years of the minibridge concept of combined rail (or highway) and sea transport, the U.S. rail network has assumed a new im

3 U.S. Congress, Report to the Governor of the Canal Zone under Public Late 280, 79th Congress, 1st session, 1947, p. 20, as cited by Representative Metcalfe of Illinois, in U.S. Congress, Congressional Record, vol. 123 no. 86 (May 19 1977).

portance for interoceanic trade. Because waterborne shipping costs have been rising several times faster than rail costs, the minibridge is increasingly attractive to shippers. And because mainline U.S. railroads are operating at only 40 percent of their existing freight capacity, experts are confident that U.S. railroads could handle substantially all the non-bulk cargo now going through the Panama Canal.

Another formidable competitor to the Panama Canal, for bulk cargo, is the growing fleet of supertankers and giant ore ships. These huge carriers are too big to use the canal, but their economies of scale more than compensate for the extra distance they must travel. The number of these behemoths is increasing every year, and the opening and expansion of deepwater terminals in the United States will no doubt further expand their use. Already some 1,850 commercial vessels are too large to transit the canal, and another 2000 can use the canl only when they are carrying less than a full load. The trend toward using these big ships is clear: in 1976, for example, they carried 17 percent of the coal traffic from the U.S. East Coast to Japan, compared with 8 percent the year before."

Other existing and potential alternatives to the canal, while not significantly affecting its total traffic, contribute to diminishing its significance. Various transcontinental and transisthmian pipelines now in the planning stages, for instance, presage a further decline in the canal's economic importance. Indeed, one estimate suggests that if the Panama Canal were closed, shipping costs on other routes would soon stabilize at levels comparable to current costs through the canal.

Militarily, the canal's value has also declined. The canal's obvious vulnerability to plane or missile attack-or even to sabotage-means that in a major conflict the canal's availability to U.S. forces could not be guaranteed, no matter who has defense responsibility. Since World War II the United States has C maintained the concept of a "two-ocean navy" with separate fleets, each with adequate forces for most contingencies. Moreover, the giant aircraft carriers, the focal point of modern naval capability, are all too big to traverse the canal. This means that many of the destroyers and other escort ships that make up each carrier's flotilla are unlikely to use the canal.

Admittedly, the canal is and will continue to be useful for redeploying smaller surface ships during a period of increasing international tension prior to an actual outbreak of hostilities. Further. though alternatives are available, the canal continues to provide an economical route for shipping equipment and supplies to support military activities abroad. No longer, however, can the canal be considered a "vital" military asset.

Beyond the military value of the canal itself. U.S. defense interests in Panama include extensive other facilities in the Canal Zone. The zone's fourteen military bases-all under the control of the U.S. Southern Command (SOUTHCOM), headquartered in the zone-have a number of missions besides the canal's defense. The zone is used for jungle warfare training, as the command and communications center for supervising U.S. military assistance in sixteen countries throughout Latin America, and as a forward base for U.S. units ready for rapid deployment anywhere in the hemisphere. But the use of the zone for these activities, though convenient, cannot be considered indispensable, since they all could be transferred to other locations. Indeed, it may be advisable to transfer at least some of these functions away from Panama no matter what happens in the treaty negotiations. Reneated recommendations, including one by the prestigious Fitzhugh Commission on Defense Organization in 1971, have been made to transfer SOUTHCOM to the continental United States. In sum, the United States will continue to have important, but not critical, economic and military interests in Panama. Economically, the canal provides

4U.S. Department of Transportation, Federal Railroad Administration, cited in C.A.C.I., Inc., U.S. National Security Interests in the Panama Canal: Projections over Time, Draft Final Report, prepared for the Office of the Assistant Secretary of Defense for International Security Affairs, Contract No. MDA 903-77-C-0148, C.A.C.I., Washington, D.C. Business Week, December 6, 1976, p. 86.

See Ely M. Brandes, "The Panama Canal in U.S. Foreign Trade (Impact of a Toll Increase and Facility Closure)" (Palo Alto, California: International Research Associates, June 1974), a paper written for the Maritime Administration of the U.S. Department of Commerce, as cited in Leon M. Cole, "Economic Ramifications of Future Panama Canal Control and Use: A Survey," U.S. Congress, Department of Transportation and Related Agencies Appropriations for 1976, Hearings before a Subcommittee of the House Committee on Appropriations, 94th Congress, 1st session, part 4, p. 65ff. Cf. the comparable experience when the Suez Canal was closed, as reported in UNCTAD, "The Effects of the Closure of the Suez Canal," United Nations, New York, 1973.