Senator HATCH. Would you expect there to be a major disruption in American-Latin American relationships if we do not have a treaty giving the canal back to the Panamanians?

Governor PARFITT. I really would not be competent to express an opinion on that matter. I really would not know how to judge that. It would appear to me that the State Department would have a better view.

Senator HATCH. Well, let us bring it down to Colombia and Venezuela, which are oftentimes mentioned. Do you think we would have a major disruption in our relationships with Colombia and Venezuela to the point of being irreparable should we not divest ourselves of the canal with a treaty?

Governor PARFITT. Again, I am not competent to say, but I do note that those two countries have been most vocal and most active in their support of the Panamanian cause.

Senator HATCH. I have particularly appreciated your testimony, and I think that it is very important to have somebody who is right there, who is familiar with the issues and the area, to come here and tell us the true facts.

You have been very helpful to the committee today and as straightforward and as fair, I believe, as you can be.

You have indicated that you believe, in response to Senator Scott's questions, that the tolls, if we do divest ourselves of the Canal, will go up considerably because the Panamanians will want to maximize profits.

Governor PARFITT. I think that would be their general tendency, but they will be constrained by the facts of life, which will not permit them to go up inordinately because if they do it would be counterproductive.

Senator HATCH. However, there is no doubt that they will go up considerably to the maximum that they can and still be economically realistic.

Governor PARFITT. It would be their aim, I believe, to make a profit to permit them to use those profits to build their country.

Senator HATCH. Both Mr. Linowitz and Mr. Bunker have personally assured me that one of the requisites of any treaty concerning the Panama Canal will be that it will not permit the Panamanians to discriminate in toll rates or other related matters among any nations.

Do you believe that that would be so if we divest ourselves of the canal and Panama takes it over?

Governor PARFITT. Well, it is my understanding that there would be a continuing commitment in that regard, to have nondiscriminatory tolls.

Senator HATCH. The question that I am getting to is this: Once the canal is divested and Panama takes over the zone, do you think we, as a practical matter, will be able to enforce that understanding without armed intervention?

Governor PARFITT. Well, I believe

Senator HATCH. That is, assuming that they change it and start showing preferences to certain nations.

Governor PARFTTT. I believe that it is reasonable to expect that they would live with a commitment of equitable treatment for all.

Senator HATCH. Do you believe that that is a reasonable expectation even for the Torrijos regime?

Governor PARFITT. Yes, because I do not see any real advantage to being discriminatory. In fact, I would suggest that since the treaty would be supported by so many other people, to deviate from a nondiscriminatory attitude would be very, very suspect and would be very adverse to Panama's own interests.

Senator HATCH. If they did, our own recourse would be armed intervention?

Governor PARFTTT. That is correct. Whatever provision that the treaty might have-whether it be arbitration or whatever might be involved in the treaty document-would be our resource. Our rights would be whatever is contained in that document.

Senator HATCH. Within the framework of your understanding of the treaty negotiations, would there by any neutral body to which we could turn to handle the problem of arbitration, other than world. opinion?

Governor PARFITT. I was not suggesting that there is arbitration. I was merely saying that there are many mechanisms that could be embodied in the treaty document.

Senator HATCH. Economic pressure could be brought about by other nations.

Governor PARFITT. As a practical matter, it would involve intervention if we wanted to change some decisions that had been arrived at which are inimical to our own interests.

Senator HATCH. I am very appreciative of your testimony, and I appreciate your informative statement. I think it has been very helpful to me personally, and to the committee as a whole.

Thank you, Mr. Chairman.

Senator ALLEN. Senator Helms?

Senator HELMS. Mr. Chairman, I thank you for your courtesy in letting me sit in on the hearing of this subcommittee. I commend the subcommittee and the distinguished chairman for looking into this highly important subject.

Governor, on page 4 of your prepared text you give updated costs for the terminal lake-third locks plan. Your basis for updating is the 1970 Interoceanic Canal Studies Commission report, is it not?

Governor PARFITT. That is correct, sir. We only made a mathematical extension using inflation factors.

Senator HELMS. Is it not a fact that the terminal lake plan studied. in the 1970 report was based on rather vastly inflated dimensions and specifications? It has never been proposed in Congress. I understand that in 1971 the Canal Company itself made a study of the cost of the more practical plan which has been introduced in Congress. I believe it has currently been introduced as H.R. 1587.

Mr. Chairman, I would personally appreciate the Governor's supplying for the record updated figures based on the Canal Company's own 1971 study. I believe that the difference in these figures compared with the Commission's report would be rather interesting.

Governor PARFITT. As you suggested, sir, there are quite a few differing plans-so-called "third lock" plans. In fact, I believe there are about six different schemes. Each one has its own cost. They range from, in 1970 dollars, $.8 billion to $1.5 billion.

We would be glad to provide for the record the figures you have asked for.

Senator HELMS. I would be most interested in seeing that.

Senator ALLEN. We hope you will provide that additional information, Without objection, it will be inserted in the record.

[The following material was subsequently supplied for the record:]

1. There have been many third lock plans and a number of variations under each plan. I would like to insert for the record the attached table in order to clarify some of the concerns about costs and some of the basic differences in the plans.

2. We have searched our records and to the best of my knowledge the Panama Canal Company did not make an estimate of the Third Locks Terminal Lake Plan in 1971 which Congressional Bills showed at a cost of $850 million. The 1970 IOCS Report included an estimate of $1.4 billion for this project based on an assumption of 35,000 transits per year capacity. Their interpretation was that three lanes of new three lift locks 140 feet wide by 1,200 feet long by 45 feet deep would be constructed near the Gatun and Miraflores Locks at the Atlantic and Pacific ends of the Canal, respectively, with maximum lake level of 92.

3. Since we do not have our own estimate we have escalated both estimates to 1977 values based on Engineering News Record (ENR) Construction Cost Index. Using the 1970 annual index of 1385 and the July 1977 index of 2583 this would raise the $850 million to $1.6 billion and the IOCS estimate of $1.4 billion to $2.6 billion. Obviously this technique is very rough and if a new estimate were made today it could be either higher or lower.

4. The current Third Locks Bills H.R. 1043 introduced by Mr. Murphy and H.R. 1587 introduced by Mr. Flood appear to be identical to each other but they show costs of $1.15 billion and $1.25 billion respectively. I do not know the basis of these estimates. The Company has not forwarded its comments on these bills as of this date.

1 The above estimates do not include the "ultimate" phase which adds new lanes and raises Lake to 92 PLD.

2 Canal and Lock capacity-All projects would need additional water supply, except existing and sea level, to attain indicated capacity.

3 15,700 transits without Kearny improvements, no additional water required. With improvements 26,800 transits, water is required. (1969 estimates of ultimate capacity.) Present estimates of ultimate capacities less because of larger proportion of large ships.

7 Corps of Engineers estimate. From 1970 IOCS study. Cost of 2-lift plan is slightly less than 3-lift plan, but in rounding off cost estimate to 2 significant figures, the 2-lift and 3-lift round to the same amount.

From 10CS study, estimate is for 3 new lanes of locks at Atlantic and Pacific. Cost will be less since only 1 will be built at Gatun and the existing locks modified.

10 1970 costs updated by Engineers News Record (ENR) construction cost index, using 1970 annual index of 1,385 and July 1977 index of 2,583.

COMPARISON OF LOCKS PLANS-DESCRIPTION OF CONSTRUCTION

Existing locks.-1969 Kearny study modifications to increase ultimate capac-ity to 26,800 (1969 estimate) consisted of miscellaneous improvements such as tugs, locomotives and deepening/sea water pumping (to provide sufficient water).

Original third locks.—Addition of one lane of locks (140' x 1200' x 45') at Gatun, Pedro Migruel and Miraflores. Existing locks would remain as is.

Modified third locks.-Same as original 3rd locks except size of chamber inIcreased to 200′ x 1500′ x 50'.

Terminal Lake 3 lift-Initial phase.-Add triple lift one lane of locks (200' x 1500′ x 50′) at Gatun. Existing Gatun locks to remain as is. Remove Pedro Miguel locks. Add triple lift one lane of locks (200' x 1500' x 50′) at Miraflores and add upper lock chambers to existing Miraflores Locks raising Miraflores Lake to present lake elevation.

Terminal Lake 2 lift-Initial phase.-Same as above except new locks are two lifts.

Flood Thurmond Rarick (Terminal Lake plan).—Add one triple lift lock lane not less than 140′ x 1200′ x 45′ and modify existing locks for 92' Lake elevation at Gatun. Remove Pedro Miguel Locks. Provide 3 new lanes of triple lift Locks at Miraflores with one lane not less than 140' x 1200' x 45′ and two lanes the same size as existing Locks.

IOCS deep draft.-Existing locks would not be modified. Add one triple lift lock lane (160′ x 1450′ x 65') at Gatun and Miraflores. New Miraflores Lock would raise ships directly to present lake level with a bypass of existing Pedro Miguel Locks.

BEST KEPT SECRET ON CAPITOL HILL

Senator HELMS. Mr. Chairman, I would like to make one more point, and I appreciate your indulgence.

I was very interested in your comments, sir, and I want to join my colleagues in commending you on your candor. I expect that these hearings may be the best kept secret on Capitol Hill in terms of the news media.

There has been such a bias in favor of what I call "the giveaway of the Panama Canal" with hardly any reference at all to the case on the other side.

Senator SCOTT. Mr. Chairman, would the Senator yield very briefly in that connection?

What business were you in before you entered the Senate?

Senator HELMS. As the Senator knows, I was in the news business. I possibly may have some expertise in watching my former colleagues. You said in your testimony, in response to Senator Scott, I believe, that our case-meaning the case of the United States and the operation of the Panama Canal-has not been "effectively made." I believe that those were your exact words.

Why do you think that is? Is it because our spokesmen have not really tried?

Governor PARFITT. Well, one reason is that the situation is a very, very complex one. I often say that people come to the Canal Zone for a short period of time to determine the situation and really leave with the conclusions that they had before they came, because the time it takes to really understand and appreciate the complex nature of the history of the organization and the operation is not available to those people.

Therefore. reports emanating from them, whether they be business groups or TV reporters or newspaper reporters, are sometimes dis