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Panamanians declared their independence. Only three days later the administration hastily recognized the new republic and immediately set about negotiating a canal treaty with a Frenchman named Philippe Bunau-Varilla, who consistently acted purely in his own self-interest, and who repeatedly engaged in deceit to win approval for actions detrimental to the Panamanian national interest.

What is more, U.S. officials at the time were aware of, and therefore complicitous in, these injustices. President Roosevelt so characterized it himself in 1911 when he stated, "I took the isthmus.

a statement upon which he later elaborated by explaining he took it "because Bunau-Varilla brought it to me on a silver platter."

Having ignored his instructions to consult at all points with the Panamanian government's official delegates, BunauVarilla drafted a treaty which was described at the time by Secretary of State John Hay as "vastly advantageous to the United States" and "not so advantageous to Panama.' This document was signed at Hay's home on the evening of November 18, only 15 days after Panama had declared its independence. Not a single Panamanian was present, or had ever even laid eyes on the document. No member of the Panamanian ruling junta spoke or read English.

That same evening Panama's delegates arrived in Washington and attempted to reopen negotiations with the Department of State. They failed. Both the Department and Bunau-Varilla were now intent upon getting the treaty ratified. This they did by suggesting darkly that if Panama did not act with dispatch the Colombians might make a better treaty offer, leading the United States to withdraw its support from the new nation.

worst.

Although the Roosevelt administration had no such intention, rumors were abroad in Panama that Colombia might yet try to regain its lost territory, and the government feared for the

On November 26 they cabled their willingness to ratify the treaty as soon as it arrived by boat from New York. Six days later, on December 2, they did so after having the 31-page document only 20 hours, and only an English version besides.

Almost from the start, the Panamanians have been dissatisfied with the treaty.

This is not hard to understand. Its terms grant to the United States "in perpetuity the use, occupation, and control of a zone of land and land under water for the construction, maintenance, operation, sanitation, and protection" of a canal "of the width of 10 miles." The treaty further

grants to the United States "all the rights, power, and authority within the zone mentioned. .which the United States would possess and exercise if it were the sovereign. .to the entire exclusion of the exercise by the Republic of Panama of any such sovereign rights, power or authority.' In return for these generous concessions the United States agreed to pay the Republic of Panama $10 million and an annuity during the life of the treaty of $250,000 (raised to $1.9 million in 1955 and subsequently adjusted for inflation in 1971 to $2.3 million).

We must try to put ourselves in the Panamanians' shoes, to see it as they do. The best way I know to do this is to cite an analogy which has great currency in Panama. like this:

It goes

Imagine a strip of land extending 5
miles on each side of the Mississippi River
within which a foreign power, by virtue of
treaty rights granted under suspicious cir-
cumstances in 1773, exercises complete con-
trol as "if it were sovereign" and through
which a resident of Illinois must pass to
go to Missouri, during which passage he is
subject to arrest by a foreign power and
trial in a foreign court under a foreign
system of laws.

Of course, we would not tolerate such a situation within our borders. The Panamanians have no choice. The United States is a superpower and they are one of the world's weakest countries. Our military forces stationed in the Canal Zone are equal in size to Panama's entire National Guard. It is no match at all.

On their side the Panamanians have only logic. They ask us to ratify a new treaty. They point out that total U.S. control over a portion of Panamanian territory is a vestige of colonialism. They ask us to understand how it offends their national honor and pride as a people to have a U.S. police force, U.S. courts, and U.S. jails enforcing U.S. laws on Panamanian citizens within their own country. They show us how total U.S. control over land area in the Canal Zone limits the urban growth of their two largest cities, how U.S. control of all deepwater port facilities restricts the productivity of Cheir country, and how U.S. commissaries unfairly compete with local businessmen.

How do we answer these charges?

The most common way of justifying the present treaty arrangements is to cite the benefits which have accrued to Panama. The most important of these, it can be conceded, is her independence. Without the United States she would not have had it. Admittedly, a certain turpitude may attach to the United States motives in guaranteeing it, but to the Panamanians, who had hankered after their freedom for some three quarters of a century, it is certainly a great blessing.

What is doubtful is that this justifies an arrangement under which she signed away "in perpetuity" the most important part of her birthright. To say that it does is like saying that the United States should be forever indebted to France, without whom her own revolution could never have succeeded.

This is history now. The relevance of that history for today is that it shows the very structure of the relationship from the beginning was one in which we consciously took advantage of the Panamanians. All the real sacrifices were on their side. They yielded up, forever, their nation's greatest resource -- the land over which the canal was constructed. What should have been theirs has become ours.

Some would suggest that Panama has been adequately compensated for this "use" of her territory by the $10 million the United States paid when the treaty was signed, plus the annuity she has been granted since. The facts belie the truth of this assertion, however. The annuity, for years set at $250,000 per annum, is today only $2.3 million per year. This is a mere pittance when compared, for instance, with the Panama Canal Company's fiscal year 1976 total operating revenues of more than $250 million. That is more, the U.S. Government has always set Panama Canal tolls at a breakeven level. The Panama Canal Company does not lose money, but neither does it make a profit.

According to a study by International Research Associates (IRA) of Palo Alto, California, the effect of this policy has been to produce a surplus to users of an amount equal to the difference between the maximum possible revenues recoverable under an alternative tolls policy and the breakeven costs actually recovered. The IRA study projects that for 1975 the magnitude of the surplus would be equal to approximately 55 per cent of the revenue recovered under present toll structures. Applying this to the IRA-projected 1975 toll revenue figure of $119.5 million, we see that the surplus which could have been recovered was on the order of another $65.5 million.

The benefits of this surplus, rather than going to the people of Panama, now accrue to three groups: (1) those who purchase

commodities that pass through the canal; (2) those who produce such commodities; and (3) those who move the commodities from producers to purchasers. Rightfully, this $65.5 million should have gone to Panama as its earning on its fundamental resource.

It can, of course, be argued that Panama has received extensive indirect economic benefits from the canal, as well as improved health conditions, sanitary facilities, etc., all of which must be taken into account in assessing the present treaty. All these things are indisputably true, but they completely miss the point. They alone cannot make the arrangement either just or unjust. It is unjust by the fact that it prevents Panama from reaping the economic advantage of her primary resource. Moreover, it does so almost gratuitously. Panama can be returned the control over her resource without it materially affecting our own economic or strategic interests. In truth, our strength and greatness will lie not in continuing to demean ourselves by insisting upon some legalistic interpretation of our "rights,' but in recognizing that an injustice has been done and acting to correct it.

What, indeed, are the United States interests in the Panama Canal ?

Economic Importance

Despite widespread impressions to the contrary, the canal is not of any great economic significance to the United States. It is often said that approximately 70 per cent of canal traffic either originates or terminates in U.S. ports, thus making the canal vital to the U.S. economy. While this figure is correct, the manner in which it is usually presented tends to misrepresent the truth. The "approximately 70 per cent" figure is derived by adding the 40 per cent of cargo tonnage originating in the United States to the 28 per cent terminating here. But it is incorrect then to conclude that the United States accounts for 68 per cent of the tonnage passing through the canal. The United States, both as shipper and receiver, is on only one end of the transaction. Therefore this figure must be halved, revealing that only 34 per cent or one-third of all canal cargo is U.S. oriented.

But even this figure does not provide a proper measure of the economic importance of the canal. We have to ask, 34 per cent of what? If the Panama Canal is largely not used, then the fact that 34 per cent of its use is attributable to the United States become 3 rather meaningless.

The United States is, in fact, the major user of the canal, but many alternative trade routes now exist for the most important products and commodities, and more would become economically competitive if the canal were closed. In terms of overall importance, the canal is much more significant to certain Latin American countries, particularly those on the west coast of South America, than it is to the United States. For instance, in 1972 only 16.8 per cent of U.S. waterborne commerce passed through the canal. For Nicaragua the figure was 76.8 per cent, for Panama 29.4 per cent, for Peru 41.3 per cent, for Chile 34.3 per cent, and for Colombia 32.5 per cent.

Increasingly, the Panama Canal is becoming outmoded. Larger and faster ships, as well as innovations such as container technology, are making alternatives to the canal more and more attractive. The shipbuilding industry in constructing supertankers increasingly discounts the canal, which cannot handle their size. More than 1,300 vessels are now too large to pass through the canal, and another 1,700 can use it only when not fully laden. Ely Brandes, president of International Research Associates and an economic adviser to the canal, has put it succinctly: "When it was in its financial heyday, nobody paid much attention. But now that people are fighting not to give it up, the thing isn't worth arguing about."

The most meaningful perspective from which to view the economic value of the canal is an assessment of the impact it has on the total U.S. and world economy. At present only 5 per cent of total annual world seaborne trade transits the Panama Canal. According to the IRA study on "The Economic Value of the Panama Canal," if the canal were to be closed through an act of sabotage or some other means, the total impact on the world economy for the decade 1975-85 would be only $100 million per annum. of this amount, the U.S. share would be only $34 million annually. In our trillion dollar-plus economy, which exports in excess of $100 billion a year, this impact is utterly trivial.

This minimal impact of complete loss of the canal must be counterpoised against the harm which this volatile issue can cause in our relationship with all of Latin America, and in fact the entire Third World. The minor economic benefit which accrues to us from the canal would certainly be more than offset by the hostility we would engender by failing to resolve the canal issue in a way viewed as equitable by the world community. Even the strictly economic effect alone would surely be in excess of $34 million. Last year our exports to Latin America were on the order of $15 billion. And as was clearly demonstrated by the gathering of heads of state on September 7th, these

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