Senator HATCH. Our research shows that, when General Torrijos took over the government in 1968, that Panama had a total debt structure of about $139 million. You have indicated here today that they owe some $2.7 billion to just the banks. I have indicated-and there is no question about it-that their leadership has admitted to a public debt alone of about $1.5 billion.

Do you have any reasons that you can give how that public debt could have jumped from $139 million to $1.5 billion or as high as $2.7

billion?

Senator ALLEN. Excuse me for interrupting, but they have just started to vote over at the House.

Mr. CRANE. I can respond quickly and then vote on the B-1 bomber. I would say that that very question is what warrants the investigation that I would hope the Senate might take up. I have spoken to members of the Banking and Currency Committee in the House. Unfortunately, they feel that the prospects are rather remote of getting hearings and an inquiry into that subject.

But the figures I have seen include approximately $850 million of loans by domestic banks and through their foreign branches, though, the additional loans total $2.7 billion. It could conceivably be higher than that.

There have also been rumors, of course, that some of those moneys have been siphoned off by Torrijos himself and spirited away into unnamed Swiss bank accounts to feather his own nest. Knowing the moral quality of the man, I find that easy to believe.

This is what ought to be brought out, I think, in any public discussion before either the House or the Senate acts on this question of alienation of that canal.

Consider two other quick poin's. One is, if we relinquish sovereignty, then that canal becomes, in effect, a multinational corporation. The United Nations has already upheld the right of expropriation. So, I think we would be very hard pressed to argue that it is ours in the face of criticism that we would receive if they simply wanted to abrogate any terms or any agreements that they made with us up to that point.

I think this, coupled with the fact that gunboat diplomacy started primarily because one illegitimate government-by illegimate, I mean an unconstitutional government; one that came to power by forcewould negotiate loans with a major foreign country such as Great Britain. A coup would take place, and one illegitimate government would be replaced by one that claimed to be legitimate and represent the interests of the people and that they were not responsible for the agreements made by a previous administration because it was an unconstitutional government.

Of course, what happened was Great Britain would send the gunboats in, take over the customs house, and put their affairs in order, and service their debts.

All I am suggesting is this. Since Torrijos is not a constitutional leader down there, since Torrijos came to power by violence and he retains his position by violence and repression, there is the very real prospect that a succeeding government, a truly representative government, might have a powerful case to repudiate any obligations as

sumed by one man, a single dictator not speaking for the people of Panama.

Senator SCOTT. Mr. Chairman, I would like to respond to that. Time will not permit me to examine my former colleague and friend during the time he is before us. But you mention Torrijos and how he came to power.

Do you feel that, with his background, that he has a right to lecture the Senate as to looking to the future rather than to the next election, as he did last night at the signing of the treaty? Is he in a position to do this?

Mr. CRANE. I think that man has no moral qualifications to lecture anybody on anything unless they want a little locker room dissertation on prostitution in Panama, living off the backs of oppressed working people, stealing from the citizenry of the Republic of Panama, and imposing violence and repression against innocent people there.

That is hardly a man that I would dignify by even acknowledging his existence, much less by negotiating with him to give away a precious $7 billion American possession.

Senator ALLEN. Thank you very much.

Mr. CRANE. Thank you, sir.

Senator ALLEN. We are now going to recess for lunch until 2 o'clock. At 2 o'clock the hearing will be continued.

[Recess taken.]

AFTERNOON SESSION

Senator ALLEN. The meeting will please come to order.

Our next witness is Adm. John S. McCain, Jr., U.S. Navy, retired, former Commander in Chief of the Pacific Fleet.

Admiral McCain, we're delighted to have you come and give us the benefit of your views. We regard you as a great American patriot and we are certainly interested in learning of your views for the record. We invite you to proceed in such a way as you see fit.

TESTIMONY OF ADM. JOHN S. McCAIN, U.S. NAVY (Retired)

Admiral MCCAIN. Thank you, sir. Senator, I consider it a great honor and a privilege to have been invited up here before your distinguished committee to make any comments or statements I want to make as far as the Canal Zone in Panama is concerned.

I would like to make a couple of comments before I go into my statement. One, the United States is in grave danger. The Panama Canal and the Canal Zone problem is a lot broader than just the use of that body of water. We are faced worldwide with advancing communism. Just to give you an example, in the last 4 or 5 years of my naval career-I've now been retired about 4 years-it has become impossible to go into Southeast Asia. It has become impossible to go into the Middle East with impunity. We have the problem of Castro in Cuba in our backyard. We now also have the problem of Torrijos and the Canal Zone.

What is actually happening is that the United States is becoming more and more constrained and constricted to the continent of North America. You might in one sense say that the Berlin wall is being taken brick by brick and moved around the continent of North America. The United States is being restricted to this area.

I cannot emphasize this enough. It is a process that is going on day after day, night after night. Unless the United States itself begins to take a strong stand-and the Republic of Panama and Canal Zone is one then we are going to lose this battle.

It is incredible to me that men who should understand these matters apparently do not. The business of an obsequious approach to nations throughout the world-I speak for example of Peking, of Moscow, and of the handling of the United States in the case when our own helicopter was shot down in Korea, and many others I could mention to

you.

I also would like to mention that concurrently we have difficulties in the Philippines. That is the two bases, Subic Bay, the naval base, and Clark Air Force Base. If we lose those two bases that is a further retraction from the Far East. Though we were successful in getting through approval of the use of Diego Garcia which is in the middle of the Indian Ocean. The Indian Ocean has become increasingly important because of the tremendous amount of raw materials that exis in Africa. The U.S.S.R. knows this and it is moving there. In fact, is infiltrating all over the world. It is infiltrating into Southeast Asia which is a matter of great concern to the Red Chinese, for example.

The subject of the Panama Canal cannot be discussed without putting it in its overall global perspective because this is exactly the type of operation we are faced with.

DEFENSE ESTABLISHMENT DECLINING

As far as the response of the United States from a global viewpoint, first, of course, is a Defense Establishment of some strength and some standing. I can assure you, Mr. Chairman, that our Defense Establishment has been in a state of decline. When I was Commander in Chief of the Pacific which included Army, Navy, Air Force, and Marine Corps, just for an example, we had 900 ships. Today we have someplace in the neighborhood of 425 ships in our active fleet. The same thing has been happening as far as our Air Force and our Army are concerned.

In the Air Force we have had this continuing deterioration under which we are constrained to use the B-52 which is antiquated and over 20 years of age. We need the B-1 and we need it badly or we are not going to have the bomber capability which is so necessary.

I have not heard this mentioned except referred to this morning, but very recently there was a treaty signed between the Soviets and Panama. The criteria of this particular treaty was that the Soviet Union would construct in Panama a hydroelectric plant to provide a base for improving Panamanian economy; second, the Soviet Union has been permitted to build and open a bank in Panamanian territory; three, the Soviet Union may utilize Colon's free zone as an outlet for Soviet merchandise which includes Old France Field in the Canal Zone; and, fourth, the Soviet Union has agreed to purchase 50,000 tons of sugar from Panama on the conditions described in the pact beginning in 1978.

So the point I'm trying to emphasize and reemphasize is that the Soviet Union is moving into Panama. One of the greatest and foremost objectives that these people have is to move into Panama. You might

say in one sense that the use of this canal is a secondary problem. What their real objective is is to surround the United States which this does. It takes in our southern flank.

Castro is a man of dubious character to say the least. My language in discussing this man's character is not permissible in a formal hearing of this sort. He is working hand-in-glove with Moscow.

We have a new axis, Senator. It is the Panama axis to Cuba and to Moscow. All three of these parties are lined up hand-in-glove in the future of the United States and what they want to do. You can rest assured that in the Caribbean we will see Soviet submarines. We have already seen Soviet destroyers operating in that area.

You might also be interested to know that at the time of the beginning of the actual operation on construction of the Panama Canal, foresighted individuals in the U.S. Government kept a naval presence there.

When I was executive officer of a submarine operating out of the submarine base at Coco Solo in 1936, we had six submarines that we deployed to the Caribbean on exercises. We had a special service squadron that came down from the United States and continually patrolled through that area. Of course, we had the Army Air Corps in those days. Our Air Force today has bases in Panama in the event matters became more tenuous or dangerous.

Finally, I have heard remarks made this morning about there being 16 so-called "choke points" in world trade. That is so but there are four that stand out above the others. The first one is the Strait of Gibraltar. The second one is the Suez Canal. The third one is the Strait of Molacca off of Singapore. The fourth one of course is the Panama Canal. The British have withdrawn, retired, and gone back into their own shell for reasons which are evident when you study history. Their best blood died in both World Wars I and II. It becomes understandable that we now have a situation in the United States where we do not have the British in between us and the enemy.

When the next war starts we're going to have to be ready to go. There will be no time to prepare under any circumstances.

Everything that I am saving to you, sir, and the committee, is involved with this Panama Canal which right now is the keystone of many of the points which I have made heretofore.

In my statement to this subcommittee on July 29, 1977, I stressed the strategic importance of the Panama Canal and described it as a vital element in U.S. seapower that should be retained without any dilution of sovereign control by the United States over either the canal or its absolutely necessary protective frame, the Canal Zone. To that end. I urged a six-point program for the United States as follows:

First, reaffirmation by the Congress of the sovereign rights, power, and authority of the United States in perpetuity over both the Canal Zone and canal, as provided in H.R. 82; second, major modernization of the existing canal under existing treaty provisions, as provided in H.R. 1587; three, authorization for a delegate in the Congress to represent U.S. citizens residing in the Canal Zone as provided in H.R.

1588.

To digress just a moment, Senator, I think it is very important that the U.S. citizens in the Canal Zone have a representative or delegate here in the Congress.

The very presence thereof carries great weight.

The next point, four, is the restoration of the pre-World War II, U.S. Navy's Special Service Squadron; five, stationing of a unit of U.S. submarines at Coco Solo; and, six, recovery of Old France Field and retention of the naval air station at Coco Solo.

In these connections, I wish to reemphasize the importance of the statement by the late Maj. Gen. Thomas A. Lane, a distinguished strategist with Canal Zone experience, that was quoted in my July 29 testimony. The very idea that surrender by the United States now or in the future of its sovereign control over the canal enterprise would remove the causes of friction is a calamitous misjudgment. Instead, Marxist-Leninist subversion would increase, and probably involve the United States in the use of force to retain its position.

Mr. Chairman, of all the points in the previously outlined program, that of retention of our undiluted sovereignty is the crucial one. Without sovereignty all other matters, including the neutrality arrangement, become inconsequential. We simply do not wish a Suez Canal type of crisis at Panama.

In view of all the facts involved in the complicated situation, the Senate should reject the proposed treaties; and then the way would be open for the major modernization of the existing canal for which project the United States now has full authority under the maintenance factor of existing treaties.

From my combined military experience, which includes Europe, Asia, the Pacific, the Caribbean and the United Nations, it is my conviction that U.S. interests are best served by keeping the canal and by retaining undiluted sovereignty over the U.S. Canal Zone, for reasons of defense as well as economic security.

Finally, I would like to reemphasize the importance of the June 8, 1977 letter of the four distinguished Chiefs of Naval Operations to the President that was quoted in the testimony of Admiral Moorer. Their conclusions reflect a vast background, including combat experience, and are more pertinent today than ever. Retired military officers are completely free to voice their innermost convictions. Active duty officers have an obligation to support the policies of their Commander in Chief.

I want to digress just a minute on that, Mr. Chairman, if I may. As far as officers on active duty, they must obey the orders of the Commander in Chief. If we ever get into a position in this country, the United States, this great nation of ours, where the military circumvents or disobeys the orders of the Commander in Chief as established by the Constitution of the United States, namely, the President of the United States, we are in for real trouble in every sense of the word.

Of course, any officer on active duty always has the prerogative of resigning.

I might say to you also that there have been times when I have disagreed radically with the high command, both military and civilian, in my naval career. Sometimes it has crossed my mind whether or not I would be serving the country better by staying or resigning. The only reason I digress into this is because of so much conversation especially in the Washington Post among other fine newspapers that I read.