U.S. banks

V. SPECIAL INTERESTS

Maintaining the favorable climate for international banking currently enjoyed in Panama is one major reason cited by those who allege that the rush toward a new treaty is propelled by special interests. In 1970, Torrijos reorganized the country's banking laws to allow international banking transactions free of taxation, together with other advantages, which resulted in the unprecedented expansion of the banking industry in Panama. Today, it is alleged that those institutions, having provided loans to Panama's sagging economy, favor a new treaty with increased annual payments in order to insure that Panama will be able to repay its debts to these institutions.

It has been noted that the chief co-negotiator of the new treaty, sits on the board of directors of a bank that has made a number of risky loans to Panama's troubled economy. This situation has raised questions of possible conflict of interest among the Congress and the public.

It is noteworthy in view of these facts that Mr. Linowitz's appointment was a special short-term appointment of only six months, thus precluding the opportunity for the Senate to question him regarding possible conflicts of interest through the formal procedure of advice and consent. The rush toward agreement to the broad treaty concepts came just hours before the Linowitz appointment expired.

Panama economy

Economic conditions in Panama have grown steadily worse over the years. Panama's indebtedness has grown from $167 million when Torrijos took power to approximately $1.5 billion currently. It is estimated that debt service alone will consume 39 percent of that country's budget this year (compared with 7 percent in the United States), and Panama's Department of Planning indicates that to refinance loans coming due, together with the deficit of $198 million, will require a total of $323.6 million. A document from the Department of Planning for Panama states (in translation) that “* * * it will be extremely difficult to syndicate loans with the commercial banks in the amounts previously mentioned ***” Also, “*** the relation between servicing the debt, and current revenues * suggest a deteriorating capacity to service this debt ***..

A confidential memorandum sent last October by the U.S. Embassy in Panama to the U.S. State Department implies that the increase in commercial loans has made the situation worse, and "permit Panama to defer grappling with the core problem ***." It states further that “much of the capital inflow of the past three years has aggravated Panama's economic malaise by exacerbating its debt service burden without enhancing overall productivity."

The financial situation has been aggravated by government measures which result in pricing Panama's exports out of the world market, through imposition of minimum wage, price supports, and rent control."

In light of the above, the timely and generous financial arrangements arrived upon this week will be crucial to Torrijos in shoring up his sagging regime. He had originally requested a payment from the United States of $5 billion, together with an annuity of $300 million until the year 2000; he was persuaded to accept the current figure of about $50 million per year, plus a generous military and economic aid package of approximately $350 million.

VI. CONGRESSIONAL APPROVAL

The Administration is aware that it will have a difficult time in persuading the Senate to ratify the new treaty, and the American public to accept it. According to Congressional leaders, current count in the Senate is around fifty favorable votes, with a total of sixty-seven needed for approval. Polls indicate that the majority of the American public opposes any treaty which relinquishes sovereignty over the Zone and control of the canal.8

Although ratification will be difficult, the next few months are viewed as more favorable for proponents than the months approaching, or during, 1978, which is an election year for one-third of the members of the Senate. In addition, the fact that the agreement was reached at a time when Congress is not in session is seen as advantageous in diminishing the possibility for protests from Members of 7 See Congressional Record, February 22, 1977, page $2820.

* See "The Canal Treaty: Words of Caution," by Charles Maechling, Jr., The New York Times, Monday, August 8, 1977, p. C23.

Congress. Further, most of the comprehensive package of payments to Panama is presented in a way which would not require Congressional action, reducing the possibility for friction and disagreement with that body.

Ratification of a new treaty is effected by agreement of two-thirds of the Senate. However, the House of Representatives is also expected to participate in the debate on the broad package of proposals designed to relinquish the Canal, as disposition of U.S. territory and other property of the United States is involved; Article IV, Section 3, Clause 2 of the United States Constitution provides that only the Congress has the authority to dispose of "the Territory or other Property belonging to the United States." As one Member of Congress warned upon hearing of the conceptual agreement:

"The House will not abide by an agreement which unilaterally relinquishes U.S. Territory, nor will the House abide by back-door loans and grants to Panama made without its consent."

VII. CONSEQUENCES

Two interrelated considerations should be examined as the terms of the actual treaty are studied. The first is the necessity for the Canal to remain open at all times to international shipping. The second is to assure American sovereignty until the turn of the century when the property and territory would be ultimately relinquished.

Currently, two treaties govern the status of the Canal. The Hay-Bunau-Varilla treaty of 1903 discusses the rights of the United States and is described earlier. The Hay-Paunceforte treaty of 1900 is between the United States and Britain wherein the United States pledges to keep any canal across the isthmus free and open to all nations, without discrimination. Panama has no such obligation, and would not be hindered from either denying transit or imposing discriminatory tolls.

Secondly, the proposed new treaty would require the gradual ceding to Panama of control over the operation of the Canal. However, any comprehensive transfer of jurisdictional rights before the turn of the century could be interpreted as a ceding of sovereignty. With sovereignty prematurely divested (either by implication or otherwise) it would not be difficult to harass the United States on every matter not specifically dealt with in the treaty. If sovereignty is to be transferred over a period of time, it should occur at the conclusion of the agreement." Should sovereignty be prematurely relinquished under the new treaty, the power of the new sovereign to exist would invite international pressures to that end, and agitation would be encouraged and intensified. The pattern of revolutionary turmoil and frequent changeovers in governments indicate that Panama would not be resistant to such pressure.

A lesson can be drawn from the Suez Canal, where an ostensibly private company, with British government participation, operated under the sovereignty of another country. Rights retained by the British to protect their property, and the declaration of the Convention of Constantinople guaranteeing right of passage to vessels of all nations were of no avail when Egypt expropriated and later closed the Canal. Similarly, a new treaty with Panama as sovereign would not insure unimpeded passage through the Canal nor would it particularly deter expropriation of the Canal.

It is believed that Panama intends to raise the tolls substantially once it controls operation of the Canal. Panama's representatives have made statements to the effect that they would like the tolls to be raised sharply, and that they do not intend to "subsidize" world shipping.

With respect to security of the Canal, the control of the Zone is as important as is control over the Canal. The Zone acts as a buffer area for any disturbances which may occur. This defensive buffer will be lost should the Zone merge into Panama, and the Canal would then be truly indefensible.

It is unreasonable to believe that the transfer of sovereignty would remove an irritant and bring about improved relations with Panama and Latin America. In attempting to appease and accommodate hostile ideological elements, the United States ignores a valid lesson of history.

See "The Canal Treaty: Words of Caution," by Charles Maechling, Jr., The New York Times, Monday, August 8, 1977, p. 023.

WORRIED ABOUT A GIVEAWAY

(By Hon. James Abdnor of South Dakota)

Mr. ABDNOR. Mr. Speaker, South Dakotans are gravely concerned about what appears to them to be the administration's determination to give away the Panama Canal regardless of any consequences to our Nation. These misgivings have in no way been allayed by the endorsements of Government officials to the press and to congressional committees even before the exact language had been set down on paper.

Quite rightly, they are asking: "If this treaty is so good for us, why is the highpowered sales pitch needed?" "Why the rush to sign the treaty when so many Senators, who must ratify it, have expressed opposition?" "What are we not being told?" "Why are we paying Panama so much money for taking the canal?"

These are good questions: questions which merit answers.

South Dakota's misgivings are reflected in Knowles C. Trippler's recent editorial in the Canova, S. Dak., Herald. It merits careful consideration:

TO GIVE AWAY-OR KEEP IT

One big item of discusion at this time seems to be the Panama Canal. This question is to be brought to the members of the United States Senate for a show down by President Carter in the near future. A couple of our national leaders made a trip down south not too long ago and came back with an agreement that they thought sounded good and that they thought the United States government and its people should agree to. It states that the U.S. will give the Canal away in the year 2000. Just what all the stipulations are is unknown at this time for it seems that the Washington "bunch" tells us "common folks" out here in the sticks just what they want us to know. We have not been able to find out where all the squabble on the Canal started or why it came up. There are a lot of people in our country that are against this "give away" program, fact is there seems to be a large majority that are against the agreement. In order for this to pass the U.S. Senate it must have 67 votes out of the 100 from the senators. If the percentage of people that are against the agreement at this time have anything to do with it it will not pass, for more than half of the people at this time seem to say "No". We have not made up our minds at this time for it is very hard to get all the facts. However we are afraid this would turn out just like too many of our other major political decisions have the past several years. If we give the Canal away and then in a few years some other country, like Russia, steps in and takes it over from them, the same old thing would happen, the United States would have to go down and fight to get back what was ours in the first place. Too many times in the past have the U.S. citizens tried to be a "good fellow" and we ended up in war to settle some matter that could have been avoided by a little bit of diplomacy. A group of South Dakotans are getting out petitions to present to our Senators to state that the people in our state do not want to give away the Panama Canal, not now or never. A slogan that they are using is "we bought it, we paid for it, we built it, and we damned well intend to keep it. If our country would lose a right to use the Panama Canal or the cost became so large that we could not afford to use it we might be sorry we had given it away to anyone. This canal is very important to the Navy and could become an item of National Security if not available. Many from both political parties think it sounds like a good deal but we think we people of this country do not "trust" anyone in Washington after many of the shady deals of the past twenty or thirty years. We are against the "give away" until we get more information. When the time comes that we are sure it will be in good friendly hands and operated in a fair manner then everyone will take a good look at the entire program.

THE PANAMA CANAL TREATY: QUESTIONABLE DEFENSE PROVISIONS

(By Hon. Leo C. Zeferetti of New York)

Mr. Speaker, after careful consideration of the recently signed Panama Canal treaty, I have made known my staunch opposition to its enactment. One of my major concerns is the section dealing with our defense of the canal and

our use of the waterway should the United States become involved in a military conflict.

I am submitting, for the record, a recent article appearing in the September 11 edition of the New York Times, authored by Paul B. Ryan. Mr. Ryan, a retired Naval officer, is currently a research associate at the Hoover Institute at Stanford University, and a former desk officer in the Pentagon's division of International Security Affairs, Latin American section. He is also the author of the forthcoming book, "The Continuing Controversy: Panama Canal Diplomacy and U.S. Interests."

The defense issue is vital to the future of the Panama Canal; therefore, I wish to share Mr. Ryan's treaties with my colleagues at this time:

THE CANAL TERMS, ARGUED FROM DIFFERENT PREMISES

STANFORD, CALIF.-In his frenetic blitz to gain public approval of the two Panama Canal treaties, President Carter has stressed that he wishes to dispel misinformation by laying out the facts. Thus, he and his chief negotiators, Ellsworth Bunker and Sol M. Linowitz, repeatedly have assured the public that the United States would have the permanent right to defend the canal by sending troops into Panama in time of crisis. Additionally, the White House says that United States warships would have "the permanent right to transit the canal expeditiously and without conditions, for an indefinite period."

But does this ostensibly forthright interpretation of treaty terms, which presumably protect vital United States strategic inerests, coincide with that held by Panama? The answer is no, if you listen to its chief treaty negotiator, Dr. Rómulo Escobar Bethancourt, who analyzed the treaty's provisions at a news conference in Panama City on Aug. 24.

Dr. Escobar's comments were broadcast by radio and subsequently published in the Daily Report of our Government's Foreign Broadcast Information Service. Surprisingly, Dr. Escobar's astonishing views, which directly contradict the White House's, appear to have been given very little publicity or entirely overlooked by the United States news media.

Dr. Escobar roundly rejects the Carter Administration's claim that the United States may send in troops. "The treaty does not establish that the United States has the right to intervene [that is, send in troops] in Panama," he said. He denied that the treaty gives the United States the right to decide when neutrality is violated or not. Neither, in his view, do United States warships have the right of expeditious transit without conditions.

As Dr. Escobar inelegantly put it: "If * * * the gringos with their warships say, 'I want to go through first,' then that is their problem with the other ships there." Presumably, Panamanian officials would look idly on while United States Navy captains, during an international crisis, haggled with merchant skippers for a place at the head of the waiting line of ships. So much for the United States right to unimpeded transit and the defense of the waterway!

Were there wildly different interpretations known to the United States negotiators during the talks? As Dr. Escobar told the newsmen, these points had been thrashed out with the Americans, but Panama had stood firm against their demands.

Faced with Panama's refusal to allow "privileged passage," the Americans finally accepted the term "expeditious transit," in order, said Dr. Escobar, to "sell" the treaty to the Pentagon. "Now they [the United States diplomats] could explain that this means privileged passage. Do not believe that we mean that," he emphasized.

Placed side by side, Mr. Carter reassuring assessment and Dr. Escobar's belligerent and cynical evaluation present the apparent paradox of two Governments outwardly reaching an agreement but secretly retaining entirely different perceptions of its provisions. Or is it a case where both negotiating teams assumed that the "real" meaning of the terms could be safely debated after both nations had won ratification from their respective Governments? Plainly, such a treaty is fraught with peril for future United States operations involving canal transits. The danger of jeopardizing the Navy's use of the waterway was apparent to Presidential candidate Carter and he implied as much during his televised debate on Oct. 6, 1976, with Gerald R. Ford. Mr. Carter said, "I would not relinquish practical control of the Panama Canal Zone at any time in the foreseeable future."

As a former naval officer, Mr. Carter understands, probably better than most people, the need for the United States to retain such "practical control" to permit its Navy to carry out missions worldwide in support of United States diplomatic policies and strategic objectives.

This is particularly true in an era when international tension, as well as miniwars of the Angola type, are much more likely to occur than an all-out war. In the light of Dr. Escobar's dismissal of United States treaty rights, can President Carter really mean what he says?

A poor treaty is worse than no treaty at all, United States diplomacy must serve the national interest, as we have recently been reminded. The Carter Administration should clear up these glaring ambiguities at once. As matters now stand, the American people have no guarantee from Panama for the protection of United States defense and security interests in the Canal Zone.