Senator HATCH. Let me ask you this: If circumstances were to prevent the Panamanians from coming into the zone, could the canal be operated on an emergency basis by U.S. civilian and military personnel?

Governor PARFITT. In our contingency planning, sir, we envision the possibility of periodic disruptions because of disorders of one type or another possibly in Panama. In those cases, given the size of the U.S. contingent, given the presence of the Panamanian citizens who live in the Canal Zone, given the fact that certain numbers of Panamanians would be present, we feel that an operation could be continued at a reduced level of efficiency for a short period of time-say, about 10 days. Beyond that we would probably need augmentation from external sources.

Senator HATCH. In other words, it has been stated by others that if we do not give up the canal, that we shall be faced with guerrilla warfare, all types of insurgency; the destruction of various locks, or in general would have a chronic problem of maintaining order in the Canal Zone. Do you agree with that?

Governor PARFITT. That has been postulated, and certainly it is a possibility. There is a very high probability of disorders and disruptions and so forth. I would certainly hope that the mutual interests of the United States and Panama in an efficient operation of the canal would be overriding and that would not entail.

Senator HATCH. The fact of the matter is that the Panamanians would find it in their best interests to help preserve the integrity of the canal, because that is where they get most of the money they need to run their country.

Governor PARFITT. A high proportion of their economy is based on that. One would presume that logic would prevail and that they would not be interested in destruction of that source of income.

Senator HATCH. If any governmental leader in Panama is advancing that as a reason for the ultimate transfer of the canal to Panama by the United States, he should be unsuccessful. As a practical matter he really cannot advance that, because he has got to maintain the integrity of that canal and cooperate with the United States in maintaining it in order to have any kind of economy in Panama of any substance.

Governor PARFITT. It certainly would be in their interest to do so. However, one cannot rule out the acts of individuals that do not make

sense.

Senator HATCH. In other words, there may be terrorists who might try to do that. Isn't that true even if the United States gets out of the operation of the Panama Canal?

Governor PARFITT. That is true, but probably to a lesser degree. It is true, though.

Senator HATCH. Is it really true to a lesser degree? Would not the Panamanian Government and the canal be more vulnerable to terrorism without the awesome might of the United States? Keep in mind that I understand that any treaty has to contain a provision that the United States can maintain the territorial integrity and use of the canal on a nondiscriminatory basis, at least this has been represented to me both by Mr. Bunker and Mr. Linowitz personally.

The point I am trying to make is that it may be just as reasonable to expect that terrorists could sabotage the canal if the United States divests itself of this property or if it keeps it. Isn't that true?

Governor PARFITT. The distinction I am trying to make, sir, is that given the full support of Panama and the Government of Panama, there is probably a better possibility of containing that. If the Panamanian Government were to stand aside, as has been suggested on occasion, then the likelihood of those types of activities is greater.

Senator HATCH. As a practical matter, the Government of Panama cannot stand aside or it would be overthrown because of the importance of the canal to the Panamanian economy.

Governor PARFITT. It certainly would not be in their ultimate interests to stand aside.

Senator HATCH. It seems to me that no leader could advocate standing aside and believe that his leadership would be continued.

Governor PARFITT. I am not sure of that, sir, because the Panamanian Government has done a rather good job of mobilizing support for their concept of taking over the Canal Zone and the Panama Canal. It is a great emotional issue. The overriding sentiment that you hear amongst the militant group-which is not representative of everybody-is support for whatever action is necessary to, in effect, get what they feel is rightfully theirs.

Senator HATCH. As a practical matter, unless they can bring about that change very effectively, assuming the United States does not divest itself of the canal, there would be supremely powerful economic forces against the continuation of that particular leadership.

Governor PARFITT. That is correct, sir.

Senator HATCH. Therefore, both sides can be very well argued. The fact that we would divest ourselves of the canal does not necessarily guarantee that terrorism or acts of terrorism will not occur. Governor PARFITT. That is correct.

Senator HATCH. What percentage of vessels in the world can actually go through the Panama Canal?

Governor PARFITT. Approximately 92 percent, sir.

Senator HATCH. Ninety-two percent can go through?
Governor PARFITT. Yes, sir.

AMERICAN LIFE STYLE IN CANAL ZONE

Senator HATCH. Let me just ask you this question: What is the average value of a single family dwelling which is rented to the U.S. Canal Zone employees-U.S. citizen Canal Zone employees.

Governor PARFITT. The average value, sir?

Senator HATCH. The point I am getting to is that some of the supporters of a new treaty have said that the American presence is a source of trouble because Americans are living a life of luxury down there in Panama. I would like you to give us your viewpoint and perspective concerning that. Are we or are we not?

Governor PARFITT. I would say that definitely we are not. We have quite a wide range of quality of housing. I would say that it is modest and represents kind of a middle America, except for the Governor's house in which I live. Except for the Governor's house there is no really resplendent set of quarters.

Senator HATCH. Well, that is only right.

Senator Scorr. If the Senator will yield very briefly-
Senator HATCH. Yes.

Senator SCOTT. If you put that into context with the living of the Panamanians, might that make a difference in your response? That would be contrasted with the average American in this country.

Governor PARFITT. In the same fashion, within Panama there is quite a wide range in quality of housing. There is housing in Panama which is much more resplendent and valuable than that which is in the Canal Zone.

On the other hand, there are the heights of poverty as well, which we do not have in the Canal Zone.

Senator HATCH. My good friend and colleague, Sam Hayakawa, during his campaign said, tongue in cheek-and it was reported as though he meant it, but nevertheless it was tongue in cheek-"It is ours. We stole it fair and square."

Do you consider the United States to have stolen the Panama Canal or do you think we paid a fair price for it in those days based upon constant dollars?

Governor PARFITT. My own personal opinion is that the quid pro quos of the 1903 treaty were not so heavily weighted in favor of the United States as is now suggested in hindsight. At that point in history it was quite a high risk and quite an investment of assets and

manpower.

Senator HATCH. Imagine if the French company had failed.

Governor PARFITT. In a major undertaking which was very difficult. I do not think the imbalance then was anywhere near as suggested today.

Senator HATCH. I think from your testimony here you are saying that we paid a fair and reasonable price and took almost inordinate risks in order to produce and develop and maintain and operate the Panama Canal.

Governor PARFITT. Yes, sir, I feel that way.

Senator HATCH. Can I also ask you if you feel that the United States has basically been fair to Panama under the circumstances? You are the Governor. You are intimately connected with the details. I appreciate the very effective and pervasive statement that you have given here today.

Do you think that we have basically been fair to the Republic of Panama in our approach to the canal up to, say, 1974, when the Kissinger-Tack Agreement was entered into?

Governor PARFITT. I believe that basically the U.S. Government has made a very extensive effort to be fair and equitable under the terms of the original agreement. Looking in hindsight, one can perhaps now say that under today's circumstances we ought to be more generous. Senator HATCH. I am talking about 1974. I think our obligation to be fair may be a continuing obligation, but you are saying that basically we have been fair.

Governor PARFITT. I think we have been basically fair. Certainly I feel that in today's circumstances we perhaps could find ways to do more to assist Panama than we are doing right now under the terms of the current agreement.

Senator HATCH. Have you seen any indication on the part of anybody in this country of an unwillingness to do more or to do what is right or to be fair to the Republic of Panama and its citizens? Governor PARFTTT. No; I do not really believe so.

Senator HATCH. Is there anybody down there in your administration or in your jurisdiction or working for you or for the Government of the United States who has indicated any willingness not to be fair, or any desire not to be fair to the Republic of Panama or the Panamanians?

Governor PARFITT. No; I think we have extended ourselves to cooperate and to work with Panama and the Panamanians.

I should say here that there is a good people-to-people relationship between the citizens of the Canal Zone and the U.S. citizens in general, with Panamanians. Recently this relationship has become rather more delicate. It has been played up as being something of a hate campaign, but it really is not a feeling from person to person.

Certainly, there are certain segments of society who have had aroused in them emotions and antagonisms that cause frictions on the local scene. However, I do not think that typifies the general basic people-to-people relationship.

Senator HATCH. It has been said by some of the critics of our present ownership of the canal that we need to give up the canal because all of Latin America is against our continued ownership of the canal.

Living in Panama and negotiating and working with other Latin American neighbors at least the nearby countries-do you agree with that statement?

Governor PARFITT. I believe that the official position of most if not all of the countries in that part of the world would be in support of a Panamanian effort to have the canal revert to them.

Having said that, I also believe that there is a body of opinion amongst the population that is not quite so sure that it would be in their interest or that it should be done.

Nevertheless, the official position is that in support of Panama.

Senator HATCH. I can see that. However, you have indicated that maybe it is not quite so strong that we would have to give it up or else lose the respect and friendship of other Latin American countries and perhaps incur the enmity of those countries, as has been advocated by those who would like to give up the canal. Is that true?

Governor PARFITT. Well, that is hard to judge, as I have indicated. In the world scene on an official basis, they will support Panama fully. Behind that there is a certain economic fact of life that tells them that it is in their interest to have an efficient operating canal. They would like to have a low-cost canal. They are quite happy with the way in which the United States has exercised its stewardship.

Therefore, this is a competing thought in their mind. How they really fall out in the final analysis I could not project.

Senator HATCH. I think it would be fair to say that they might not be overly concerned if the U.S. continues to operate the low-cost operation of the Panama Canal and decides to forego the treaty.

Governor PARFITT. I believe that that would be their innermost thought, but I still believe that they would vocalize support

Senator HATCH. For the Latin American Community they would

Governor PARFITT. Yes; they will vocalize support.

Senator HATCH. Are you talking about the immediate countries around Panama, or all Latin American countries.

sir.

Governor PARFITT. Pretty generally all Latin American countries,

94-468 - 77-5

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