Secretary VEYSEY. They generally are engaged in the furnishing of factual information about the operation of the Company, or the Zone, or the military or whatever down there, which will serve as a basis for the negotiators in their various moves which they make.

Mr. SNYDER. They get input from the Executive generally, from the White House.

Secretary VEYSEY. No, I can never remember any case in which they

Mr. SNYDER. In your capacity as chairman of the Panama Canal Working Group, did you shed some light on initial depreciation of basic Panama Canal assets, on the financial picture of the Panama Canal Company?

Secretary VEYSEY. You are seeking information

Mr. SNYDER. I am referring to the new financial, or relatively new financial procedure of depreciating fixed assets so we get them depreciated out by when we give this canal away.

Secretary VETSEY. Well, that matter

Mr. SNYDER. I make it blunt so you understand.

Apparently you do not understand when it comes from the White House.

I want to make sure you understand me.

Secretary VEYSEY. That matter has not come before the Working Group during my tenure.

Mr. SNYDER. Has this matter of depreciation come up before anything over there in your shop which deals with the Panama Canal? Secretary VEYSEY. I do not believe any change in that item has come up during the time of my tenure, no.

Mr. SNYDER. When did you take over?

Secretary VEYSEY. One year ago.

Mr. SNYDER. All right, you are probably right.

Are you going to be back on Thursday?

Secretary VEYSEY. Mr. Chairman?

Mr. METCALFE. You are expected back, Mr. Secretary, yes.
Secretary VEYSEY. Yes, I will be here Thursday.

Mr. SNYDER. I see. What would modernization of the canal, the third locks, do to the traffic?

Secretary VEYSEY. Well, the problem confronting the canal during the past year or two has been insufficient traffic.

A third lock, of course, could accommodate additional traffic, but that could break into two categories.

Conceivably a third lock could be large enough to accommodate a certain number of vessels which are too large to transit through the present two locks.

Mr. SNYDER. Mr. Secretary, that is the second bell.
Secretary VEYSEY. Yes.

Mr. SNYDER. On a recorded vote.

In order not to keep you since you will be coming back on Thursday, I would like to ask you if you would, to acquaint yourself with a St. Louis Post Dispatch story of March 28, 1976. General Dolvin, is he here? I will ask you some questions about it on Thursday.

Mr. METCALFE. The committee will stand in recess for 10 minutes, and after that, we will hear from the National Maritime Union of America.

Thank you very much, Mr. Chairman. We appreciate your time. Secretary VEYSEY. Thank you.

[Whereupon, a short recess was taken.]

Mr. METCALFE. The recessed meeting of the Subcommittee on Panama Canal will come to order.

I will recognize the distinguished gentleman from Kentucky for a unanimous consent request.

Mr. SNYDER. Mr. Chairman, I ask unanimous consent that a New York Times article dated September 16, 1975, entitled "Pentagon yielded to Ford on Canal" be inserted in its entirety at this point in the record.

Mr. METCALFE. Without objection it is so ordered. [The article follows:]

[From the New York Times, Sept. 16, 1975]

PENTAGON YIELDED TO FORD ON CANAL

DIRECTIVE BROKE DEADLOCK OVER U.S. POSITION AT PANAMA DISCUSSIONS

(By David Binder)

WASHINGTON, Sept. 15-The White House succeeded in breaking a deadlock in the Pentagon on controversial aspects of a new Panama Canal treaty last summer, permitting the Ford Administration to resume stalled negotiations in Panama this month, top-level Washington officials said today.

The deadlock, resulting in part from powerful opposition to the State Department's concept of a treaty that would turn over defense of the canal to Panama in less than 50 years, was broken only after the National Security Council had met twice on the issue and President Ford had sent a directive to all the agencies concerned.

The canal talks halted last March when Ambassador Ellsworth Bunker, the chief United States negotiator, returned from Panama after completing agreement in principle on less controversial aspects of a new treaty.

The Administration was then confronted with the problem of agreeing on guidelines for the more controversial issue of the duration of a new treaty. Leading Officials Opposed

According to participants in Pentagon debates, leading officials in the Defense Department, including Secretary James R. Schlesinger, expressed sharp antagonism to any agreement that would relinquish defense of the Canal to Panama in less than 50 years.

"You have to remember what was going on at that time," a Pentagon official said. "We were being driven out of Southeast Asia. When Saigon fell the attitude tightened considerably at the department. A lot of men said, 'Why give away something you already have?"

A Cabinet-level participant in the debates recalled: "There were some quite high-ranking officers who said after Saigon that the United States should stand up if tested and be firm. The Mayaguez in spades."

He added that "some said 'Perpetuity is not long enough' for the United States to defend the canal."

The Panama Canal treaty of 1903 gave the United States authority to operate and defend the canal "in perpetuity." The Ford Administration is committed to a new treaty of limited duration.

Agitation in Panama Feared

The hard line adopted by Mr. Schlesinger and others was opposed by Secretary of State Kissinger, Deputy Secretary Robert S. Ingersoll, Ambassador Bunker and Assistant Secretary of State William D. Rogers.

They argued that to confront Panama with such demands would not only undermine negotiating efforts but also invite increasing agitation by radicals in Panama.

The impasse continued into July, with "a good bit of passion involved" on the Pentagon side, as the Cabinet official described it.

But the State Department had allies in the Defense Department, officials from both recounted. Among them were Deputy Secretary William P. Clements Jr. and Robert F. Ellsworth, the Assistant Secretary for International Security Affairs.

As complaints from the Panamanian Government of Gen. Omar Torrijos Herrera mounted about the lengthening pause in negotiations, Mr. Kissinger convened a meeting of the National Security Council in July.

"Defense was not leaned on," Mr. Kissinger recently recalled. “Before that they just didn't have a position."

Directive From Ford

But it took a second National Security Council meeting Aug. 9 and a directive from President Ford the same day to all the agencies concerned to break the Pentagon deadlock, participants related.

"We were asked to go back and scrub our arguments very hard and to be as forthcoming as we could be," a defense official said. "We found a little more give."

As a result, the Administration was able to work out a compromise on the critical question of treaty duration.

The compromise envisions transfer of canal operations to Panama by the year 2000 but United States defense of the canal for about 40 years.

In addition, an Administration official said, the Pentagon won concurrence for its demand that the new treaty provide for negotiation of a future bases agreement with Panama permitting the United States to continue participating in the defense of the canal.

Agreement on this negotiating position permitted Ambassador Bunker to resume treaty talks with the Panamanian Government on Sept. 8. According to a State Department official, the talks have gone "pretty well."

Mr. METCALFE. Our next witnesses are the members of the National Maritime Union of America.

Will you please identify yourself, gentlemen, for the record. STATEMENT OF SHANNON J. WALL, PRESIDENT, NATIONAL MARITIME UNION, ACCOMPANIED BY RENE LIOEANJIE, REGIONAL REPRESENTATIVE OF NMU IN PANAMA; EDWARD GASKIN, BUSINESS AGENT, NMU, IN PANAMA; AND TALMAGE SIMPKINS, EXECUTIVE DIRECTOR, AFL-CIO MARITIME COMMITTEE

Mr. WALL. Yes, Mr. Chairman.

I am Shannon Wall, the President of the National Maritime Union.

I am accompanied here today by Mr. Rene Lioeanjie, who is general representative of the NMU in Panama; Mr. Edward Gaskin, who is business agent of the NMU in Panama, and Tal Simpkins, who is executive director of the AFL-CIO, Maritime Committee. Mr. METCALFE. All of whom are very well-known with us on the committee.

Mr. WALL. Thank you.

I appear here not only as President of the National Maritime Union, but also as chairman of the AFL-CIO Maritime committee. Off the record, Mr. Gaskin's father was one of the original builders of the Panama Canal, so he has a good deal of background and history to go along with his presentation.

We appreciate this opportunity to appear and to testify on the subject that is of major concern not only to our members in the Panama Canal Zone, but also to the seamen who man the Americanflag merchant marine vessels.

The reported losses for the past 2 years, plus the projections for this fiscal year, would indicate that the Panama Canal is in trouble unless something is done. There is not much that can be done about the drop-off of transits due to the slump in world commerce. But there are some things that can be done, and some things that should not be done, in the vital areas within our control.

The proposal to change the rate of pay of the nonmanual positions 4, 5, and 6 and the manual grade 10 from the U.S. pay base to the Canal Zone base, while it would, in effect, freeze these workers' pay for over the 10 years, is a crushing blow to their present morale and future aspirations.

We question where this proposal came from. We certainly doubt if it came from anyone in the zone who has a knowledge and an understanding of the problems which exist there. This attempt to make up for the financial deficit by taking from the workers creates more problems, by magnifying long-standing discriminations and bad feelings, than the dollars saved would solve.

The Caribbean wage scale-the historical forerunner of the present Canal Zone area wage scale-was established by the Isthmian Canal Commission around 1903 in order allegedly not to conflict with the economy of the surrounding Caribbean and Latin American countries from which local labor was being recruited by the U.S. Government.

When the U.S. Government entered the scene in that part of the world in 1903, there existed a completely different set of conditions than those that exist today.

In order to provide incentives for workers to brave the then-known health hazards of this area, U.S. officials, from the very outset, had to plan to provide for the total needs of its army of imported workers-United States and tropical labor alike. Armed with a treaty giving it wide powers, it is not surprising that the Canal Commission set up a miniature U.S. city government almost overnight in the zone with its own health department and hospitals, post offices, police force, schools, bakeries, storehouses, commissaries, clubhouses, playgrounds, et cetera.

Food was imported from the United States to maintain the essential needs of this work force. Thus, from the very outset there was established on the Canal Zone a basically North American and U.S. cost-of-living economy throughout the zone and the terminal cities of the Republic. It is to be noted that all employees-both United States and non-United States-were granted the right to purchase on the zone, regardless of residence, at identical prices. This was subsequently changed in 1957.

Today, a can of corned beef, which sells for $1.65 in a Canal Zone Commissary, 99 cents in Detroit, and $1.16 in Brooklyn, N.Y., sells in Panama City for $1.90. Premium gasoline sells throughout the Republic of Panama for at least $1 per gallon.

When viewed today from the economic standpoint-and this has been true for the past 50 years at least-the American dollar and the Panamanian "Balboa" are used interchangeably on the entire isthmian economic scene. The purchasing power or value of both is identical, and anyone familiar with the facts will agree that this

condition is not true of Costa Rica, Haiti, Colombia, San Salvador, Barbados, Jamaica, Trinidad, and many others of the surrounding countries.

It is vitally important to point out here that even though some non-U.S. citizens, who work on the Zone, were "drawn originally from neighboring Central American countries and the West Indies,' the vast majority of non-U.S. citizen employees of the zone are Panamanian nationals. It is important to add here also that none of these employees live or fulfill their day-to-day needs in these so-called surrounding countries, where the cost-of-living is substantially lower than that prevailing on the Isthmus of Panama.

They, therefore, must reside on the zone or in the nearby cities of the Republic of Panama and must purchase all their basic commodities and household and personal goods in a predominantly North American economy at North American prices while receiving wages geared to a "Canal Zone Area" standard.

Canal Zone labor unions have long been of the opinion that the coverage of the Canal Zone workers under the U.S. minimum wage law in 1966 effectively underscored the inadequacy and indefensibility of any continued adherence to a dual wage philosophy in the zone. Whenever the argument is advanced that "this policy is in accord with the general policy of the United States in its overseas areas to establish prevailing local rates of pay and conditions of employment for local native employees," we hasten to point out that there are certain fundamental differences involved insofar as the Canal Zone is concerned.

We partly concede that in the instances of temporary bases established in Europe, Asia, and parts of the Western Hemisphere other than Panama-this policy may be construed as a relatively realistic one; but in the case of the Canal Zone, it must be remembered that this strip of land was leased--as widely proclaimed-in perpetuity. Unlike the shorter sojourns made by the Army and/or Navy in France, England, and other countries, the U.S. Government officially considered its tenure as of unusually long duration.

What we have here is a clear-cut compounding of an historical inequity being proposed and designed to achieve dubious economic savings at the expense of non-U.S. citizen employees, the vast majority of whom are between grades NM-1 through 6 and MG-1 through 10.

H.R. 12641, this legislation provides for the temporary deferment of payment to the Treasury on the net direct investment of the Government in the Panama Canal Company. As we understand it, this legislation would do three things:

First, the annual interest paid by the Panama Canal Company to the U.S. Treasury on the Government's net direct investment in the Canal would be reduced by an offsetting interest earning on the cash that the company has on deposit with the Treasury;

Second, interest payments on the government's investment would be paid to the extent earned; and

Third, the interest charges not earned would be added to the net direct investment of the Government in the Panama Canal Company. This differs from the current situation in that the Panama Canal