plan assures full protection to the holders of the present external debt of the Republic of Panama to the payment of which this annuity is presently pledged." Additionally, shortly prior to the signing of the Panama Canal Treaty of 1955, Mr. Phleger advised the Secretary of State by memorandum dated May 3, 1955, as follows:

"As the treaty is drafted, I see nothing that would prevent the hypothecation of the monies to become due to Panama under the 1955 treaty."

Please state to the Committee if similar advice has been given in connection with these proposed treaties?

Answer. Mr. Hansell has not given similar advice in the form of a memorandum to the Secretary of State, as was done in 1955. However, the Office of the Legal Adviser has advised both the treaty negotiators and other Department of State officers that the payments to be received by Panama under the Panama Canal Treaty could be assigned by Panama to its fiscal agents as security for these bonds in the same fashion as the 1955 Treaty payments are currently pledged. Moreover, the Department of State has discussed this matter with both representatives of bondholders and Panamanian officials, and it is understood that Panama intends to hold discussions in the near future with the bondholders and fiscal agents to work out appropriate technical adjustments to their existing arrangements in order to continue the security for these bonds after the new treaties are ratified. The U.S. does not expect to be directly involved in those discussions, however.

Questions 6 and 7. Twenty million dollars is proposed pursuant to these agreements (Note Regarding Economic and Military Cooperation) to go to Panama as loans or loan guarantees to the Panamanian development bank, COFINA. Please state where you find statutory authority for the Overseas Private Investment Corporation to make loan guarantees on interbank transactions of the sort obviously contemplated by this executive agreement. Have such interbank loan guarantees ever before been permitted? If so when and to whom were the guarantees extended?

Answer. OPIC promotes development of private enterprise in the developing countries in various ways including the financing of Intermediate Credit Institutions which, in turn, finance private projects in such developing countries. OPIC's authority to finance ICI's is found in its general guaranty authority under Section 234 (b) of the Foreign Assistance Act of 1961, as amended to further the general corporate purposes of OPIC set forth in the Act specified in Section 231.

Section 231 provides that OPIC shall undertake “(b) too utilize private credit and investment institutions and [OPIC's] guaranty authority as the principal means of mobilizing capital investment funds . . . In the case of COFIÑA, OPIC would mobilize the funds of a U.S. lender by guaranteeing its loan to COFINA.

When OPIC supports an ICI, OPIC carefully reviews the investments made by it to determine that they promote private enterprise in such countries. In fiscal 1975 OPIC guaranteed a loan to the ICI Confederation of Latin American Credit Unions ("COLAC") in Panama for relending to credit unions throughout Latin America. In the past OPIC has made loans from its direct investment fund ("DIF") to such ICI's as ADELA in Latin America, and PICA and Korea Capital Corporation in the Far East. In fact, OPIC's legislative history evidences consistent Congressional interest that OPIC work closely with ICI's. OPIC's legislation contains no restrictions that prevent it from guaranteeing loans from U.S. lenders to ICI's wholly-owned by a government.

COFINA is an example of an ICI which supports private enterprise in Panama. Before OPIC would approve the proposed loan guaranty, COFINA's operations would be carefully investigated and the guaranty would require approval by OPIC's Board of Directors.

Questions 8 and 9. I was interested in the comment in your prepared statement to the effect that the executive agreement providing for all of these various loan programs is not, in any sense, legally binding on the United States. I would note that the SALT Accord in Vladivostok, the Final Act at Helsinki, the Sinai Accords, the Nixon-Thieu letters, the Soviet oil and grain agreements, and the Paris Agreement on the War in Vietnam were all also handled as executive agreements permitting our negotiators to wheel and deal free of Congressional constraint and that in each case the Department of State found it convenient to avoid characterizing these documents as legally binding, but they have certainly embodied

major foreign policy decisions and have had a significant effect on our country and indeed on world history. If this particular executive agreement (Note Regarding Economic and Military Cooperation) is not legally binding, it does promise something to Panama, does it not? In legal parlance, is this executive agreement somewhat akin to a promise which cannot be enforced against the promisor because of lack of consideration?

Do you think that Panama should be specifically advised in writing that this document (Note Regarding Economic and Military Cooperation) has no legal effect?

Answer. The United States Note Regarding Economic and Military Cooperation is a unilateral statement to Panama that the United States "is prepared to agree," within the limitations of U.S. legislation and subject to the availability of appropriated funds, to certain economic and military cooperative projects with Panama. It is not legally binding and is not an agreement between the two Governments. The text of the Note stipulates that the United States undertakings "will enter into force upon an exchange of Notes to that effect between our two governments." There will be a legally binding international agreement between the two Governments upon the exchange of Notes, although that undertaking would be fully subject to the qualifications set forth in the Note.

The Government of Panama is completely familiar with the legal status of each of the agreements and other documents related to the Panama Canal Treaties. Question 10. One of the problems of non-binding executive agreements is that frequently the other side does not understand that these agreements are, in fact, non-binding or at least asserts a lack of understanding to that effect. A perfect example is the Russian position on the SALT Accord signed by President Ford in Vladivostok. Since that Accord was not legally binding, the negotiators for the United States did not put much stock in it one way or another, and President Ford did not seek the advice and consent of the Senate, but the Soviet Union has kept insisting all along during the recent renewed SALT negotiations that the United States has deviated from its word. Don't you think that it would be a good idea for the United States either to have legally binding executive agreements or no agreements whatsoever, or at a minimum to disclaim legal effect in precise language in the document itself? Don't the dangers of misinterpretation otherwise outweigh the advantages of promised but non-obligated performance? Answer. All executive agreements are legally binding under international law. There are occasions upon which the United States enters into a political or moral commitment that is not legally binding, but in such cases the legal status of such commitment is clearly understood by the parties thereto. For example, at the concluding session in Helsinki of the Conference on Security and Cooperation in Europe, all of the parties, including the United States, agreed that the Final Act of the Conference was not legally binding, and this was reflected in the language of that document. However, the fact that there is no specification in an agreement does not normally lead to misunderstandings or misinterpretations concerning its status.

It is United States practice to have the legal status of its international arrangements clearly understood by all parties to them, including whether they are legally binding agreements or some other kind of arrangement. In any event, specification that a document is not legally binding, or is not a formal agreement, does not preclude governments from asking for compliance with whatever political or moral commitments have been undertaken. This is perhaps best illustrated by the Helsinki Final Act and the practice thereunder.

Question 11. I note again from your response to the questions of the committee that you do not consider this Note Regarding Economic and Military Cooperation to be legally binding. Has this agreement nevertheless been reported to the Congress under the terms of the Case Act?

Question 12. Do you assert that the Case Act requires the reporting only of "legally binding" executive agreements?

Answer. The Note Regarding Economic and Military Cooperation has not been transmitted to the Congress under the Case Act because it is not a legally binding agreement.

The Case Act requires the transmission to the Congress of international agreements other than treaties (executive agreements). The legal view and practice of the United States, as well as of the world community, it is to consider as international agreements commitments that are legally binding.

Question 13. Mr. Hansell, you are undoubtedly familiar with the Department of State Circular #135. As you know, Circular #135 defines the difference be

tween a treaty and an executive agreement somewhat in this fashion: A treaty is an agreement with a foreign country which is subject to the advice and consent of the Senate and an executive agreement is an agreement with a foreign country which is not subject to the advice and consent of the Senate. In effect, the Department of State asserts absolute authority to decide which agreements are executive agreements and which are treaties. Now, to me, it seems that an agreement to provide some $345 million in aid might be elevated to the status of a treaty when the $345 million directly figures in concurrent treaty negotiations of a plenary nature. But the Department of State, pursuant to Circular #135, has felt free simply to characterize the agreement as an executive agreement and thereafter to have done with the matter, dispensing with the advice and consent of the Senate. Perhaps you could state to the Committee your own definition of the difference between a treaty and an executive agreement.

Answer. Several factors are relevant to deciding whether a particular agreement should be a treaty or an executive agreement. As set forth in the regulations known as Circular 175, these factors are as follows:

"a. The extent to which the agreement involves commitments or risks affecting the nation as a whole;

"b. Whether the agreement is intended to affect State laws;

"c. Whether the agreement can be given effect without the enactment of subse quent legislation by the Congress;

"d. Past U.S. practice as to similar agreements;

"e. The preference of the Congress as to a particular type of agreement;

"f. The degree of formality desired for an agreement;

"g. The proposed duration of the agreement, the need for prompt conclusion of an agreement, and the desirability of concluding a routine or short-term agreement; and

"h. The general international practice as to similar agreements." Senator Sam Ervin's Subcommittee on the Separation of Powers of the Senate Judiciary Committee, after hearings in 1972 on this subject, wrote:

"American constitutional law recognizes, in the Constitution itself and in judicial opinion, three basic types of international agreement. First in order of importance is the treaty, an international bilateral or multilateral compact that requires consent by a two-thirds vote of the Senate prior to ratification. . . . Next is the Congressional-executive agreement, entered into pursuant to statute or to a preexisting treaty. Finally, there is the "pure" or "true" executive agreement, negotiated by the Executive entirely on his authority as a constituent department of government.

"It is the prerogative of the Executive to conduct international negotiations; within that power lies the lesser, albeit quite important, power to choose the instrument of international dialog."

(93d Con., 1st Sess., Congressional Oversight of Executive Agreements 6 (Comm. Print 1973)).

In the case of the Note Regarding Economic and Military Cooperation, the U.S. wished to assure that our rights under the Panama Canal Treaties would not be contingent upon implementation of the programs described therein. Accordingly, it was not in the U.S. interest to include these programs in the Treaty. The fact that we succeeded in our efforts to obtain Panama's agreement to this arrangement does not imply that the Administration does not intend to press for implementation of the program which we consider to be in the U.S. interest. What it does imply is that our legal rights with respect to the Panama Canal will not be conditioned in any way on the ultimate outcome of this independent undertaking.

Question 14 and 15. Many leading Constitutional authorities on executive agreements, such as Professor Raoul Berger, have disagreed with the position of the Department of State on this subject, but in any event this issue of treaty versus executive agreement is a basic issue of separation of powers between two branches of government and therefore does resolve itself into a question of what action each branch can take to protect its own prerogatives and powers. In that connection, are you familiar with Senate Resolution 24 introduced in this Congress by Senator Church and cosponsored, I might add, in the last Congress by then-Senator, now-Vice President Mondale?

Does the Department of State favor the passage of S. Res. 24?

Answer. The Administration has set forth its position with respect to the proposed S. Res. 24, in a letter to a report to the Chairman of the Senate Foreign Relations Committee dated December 30, 1977. We would be pleased to provide a copy to this Committee.

STATEMENT CONCERNING NOTE REGARDING ECONOMIC AND MILITARY

COOPERATION

At the hearing on November 15, the question was asked whether the Note Regarding Economic and Military Cooperation had been reported under the Case Act. The answer is that that Note has not been transmitted to the Congress under the Case Act because it is not a legally binding agreement.

QUESTIONS ADDRESSED TO RICHARD N. COOPER, UNDER SECRETARY OF STATE FOR ECONOMIC AFFAIRS

Question 1. Please describe briefly your present duties at the Department of State?

Answer. Under Secretary Cooper serves as the Under Secretary for Economic Affairs. He was appointed by the President by and with the consent of the Senate as stated in PL 92-353. His principal responsibilities consist in advising the Secretary of State on international economic affairs and in carrying out the Secretary's directives in this field. This activity consists in: giving broad supervision to the Department on economic policy issues; coordinating U.S. economic policy with other agencies, consultation and negotiation with representatives of foreign governments, and assuming specific responsibilities as directed by the Secretary of State.

Question 2. How long have you served in your present job?

Answer. Mr. Cooper was sworn into office as Under Secretary for Economic Affairs on April 8, 1977.

Question 3. Were you employed at the Department of State prior to your appointment as Under Secretary of State for Economic Affairs? If so, in what capacity?

Answer. From August, 1965 to August, 1966 Mr. Cooper was Deputy Assistant Secretary for Economic Affairs responsible for international monetary issues. From time to time, over the past several years, he has been a consultant to the Department, and from February 3 to April 8 he served in the Department as a Foreign Service Reserve Officer, Class-1.

Question 4. You participated in certain of the negotiations here in Washington with Minister Nicolas Ardito Barletta, Minister for Economic Planning and Development of the Republic of Panama. When were those meetings held, and how many were there?

Answer. Under Secretary Cooper participated in three meetings of discussions and negotiations with the Panamanian Minister, Mr. Nicolas Ardito Barletta on June 28, 1977, June 30, 1977 and July 13, 1977.

Question 5. Did you participate in any negotiations in Panama?

Answer. Under Secretary Cooper did not participate in negotiations in Panama. Question 6. At what point in time did you begin to be advised of the specific progress in the negotiations and specifically, when were you given information regarding the proposed loan package later discussed in direct negotiations between you and Minister Barletta?

Answer. Under Secretary Cooper followed the progress in Panama Canal negotiations only at a distance and in general until late June 1977, at which time he was requested by the Secretary to hold conversations with the Panamanians on certain economic issues. He subsequently participated in the meetings with the Panamanians listed in the answer to question 4.

Question 7. Who else attended these discussions on economic aid to Panama? Answer. These discussions included at various times Under Secretary Cooper, Ambassadors Bunker and Linowitz, Treasury Under Secretary Anthony Solomon, Treasury Deputy Assistant Secretary Arnold Nachmanoff, AID Assistant Administrator Ted Van Dyk, U.S. Executive Director to the World Bank, Edward Fried, U.S. Executive Director to the Inter-American Development Bank, Ralph Dungan, U.S. Executive Director to the International Monetary Fund, Sam Cross, Treaty Economic Affairs Advisor, Richard Camaur, Under Secretary Cooper's Assistant, Jessica Einhorn, and Peter Gosnell of the Eximbank.

Question 8. Please identify all representatives of the United States, whether or not directly employed by the United States, who, on July 16, 1977, discussed with any representative or official of the Republic of Panama any matter involving the financial aspects of the proposed Panama Canal treaties or the economic

aid commitment set forth in the executive agreement dated September 7, 1977, entitled "Note Regarding Economic and Military Cooperation." (Please consult records available to you at the Department of State to provide a full response in the event you do not have personal knowledge of the information sought.) Answer. A check of records at State, Treasury and Defense indicated that no meeting with Panamanian representatives was held on the date in question regarding economic arrangements.

Question 9. Please identify any private citizen of the United States who, purporting to act on behalf of the United States or appearing to act on behalf of the United States, discussed on July 16, 1977, with any representative or official of the Republic of Panama any matter involving the financial aspects of the proposed Panama Canal treaties or the economic aid commitment set forth in the executive agreement dated September 7, 1977, entitled "Note Regarding Economic and Military Cooperation." (Please consult records available to you at the Department of State to provide a full response in the event you do not have personal knowledge of the information sought.)

Answer. The State Department has no information on any private United States citizen who had any discussions on July 16, 1967, with Minister Barletta regarding either the proposed treaties or the economic cooperation program.

Question 10. Please identify all representatives of the United States, whether or not directly employed by the United States, who, discussed with any representatives or official of the Republic or Panama during the month of July, 1977, any matter involving the financial aspects of the proposed Panama Canal treaties or the economic aid commitment set forth in the executive agreement dated September 7, 1977, entitled "Note Regarding Economic and Military Cooperation." (Please consult records available to you at the Department of State to provide a full response in the event you do not have personal knowledge of the information sought.)

Answer. The following persons discussed with representatives of Panama economic arrangements in July 1977: Ambassador Ellsworth Bunker; Ambassador Sol Linowitz; Undersecretary Cooper; Treasury Undersecretary Anthony Solomon; Treasury Deputy Assistant Secretary Arnold Nachmanoff; Treaty Negotiator Richard R. Wyrough; Ambler Moss, Special Assistant to Ambassador Linowitz; Treaty Economic Affairs Adviser Richard Camaur; State Department Financial Economist Robert Taylor; and State Department Consultant Ely Brandes.

Question 11. Please identify any private c'tizen of the United States who, purporting to act on behalf of the United States or appearing to act on behalf of the United States, discussed with any representative or official of the Republic of Panama during the month of July, 1977, any matter involving the financial aspects of the proposed Panama Canal treaties or the economic aid commitment set forth in the executive agreement dated September 7, 1977, entitled "Note Regarding Economic and Military Cooperation". (Please consult records available to you at the Department of State to provide a full response in the event you do not have personal knowledge of the information sought.)

Answer. Dr. Ely Brandes, of 554 Madison Way, Palo Alto, California. He is President of International Research Associates and has been engaged as a consultant by the Panama Canal Company and the Department of State. During the negotiations, he was engaged by the Department as a consultant on the treaty's economic arrangements. Dr. Brandes also discussed financial aspects of the treaties with representatives of Panama.

Question 12. On February 24, 1959, the Department of State transmitted a note to the Embassy of Panama at Washington which contained a detailed report of the dispensing of $1,430,000 of the annuity for 1959 to various banks in New York with a balance of $500,000 of the annuity for that year being paid into the National Treasury of Panama. On December 12, 1962, with respect to the 1963 annuity payment, the Department of State advised the Ambassador of Panama that, in accordance with the instructions of the Government of Panama, the annual unhypothecated payment of $500.000, which until that time had continued to go to the Treasury of Panama, would cease to be paid to Panama and would be paid instead pursuant to the irrevocable authorization of Panama to the Chase Manhattan Bank. Certainly, one can understand that one reason Panama would wish an increase in its annuity payment is that Panama apparently never sees