PANAMA CANAL TREATY NEGOTIATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00803R000400040002-9
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 26
• Document Creation Date: December 19, 2016
• Document Release Date: August 8, 2000
• Sequence Number: 2
• Publication Date: July 10, 1973
• Content Type: MEMO

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THE DEPUTY SECRETARY OF STATE
WASHINGTON
NSC UNDER SECRETARIES COMMITTEE
SECRET
MEMORANDUM FOR THE.PRESIDENT
Subject: Panama Canal Treaty Negotiations
In accordance with my recommendation of March 20 and
your approval conveyed to me by Dr. Kissinger on June 18,
the Under Secretaries Committee initiated an Inter-Agency
review of our treaty relations with Panama and is pleased
to transmit its findings and its analysis of the several
policy options open to the U.S. (attached).
Since undertaking this policy review two new pertinent
developments have occurred. Panamanian Foreign Minister
Tack has written to the Secretary of State proposing eight
principles as a new basis for negotiations, and Ambassador
Anderson h,-,-- resigned. Although we find that the Panamanian
position contained in the Foreign Minister's letter warrants
probing to determine whether it offers new prospects for the
negotiations, which we expect Ambassador Anderson's successor
to undertake, we recommend nevertheless that Option B be
adopted now and implemented in consultation with Ambasssador
Anderson's successor.
The Under Secretaries Committee has approved the uni-
lateral actions not requiring congressional action which are
listed in the attached, with the exception of items IV, C,
23, 24 and 25, pertaining to SOUTHCOM and proposed changes
in the administration of the Canal. These approved actions
will be implemented at some future date after appropriate
consultations with the treaty negotiator. We shall keep you
informed of the progress of the implementation of these meas-
ures.
The Committee proposes that you approve the following
measures requiring congressional action which we believe
would not encounter serious congressional opposition: IV,
?B, Nos. 5,15, 16 and 17 which involve changing the Canal
State'Dept. declassification &
release instructions on file
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Zone's postal system, excluding the application of U.S. wage
and health standards to Panamanian enterprises in the Zone,
transferring a tract of unused land to Panama, and permitting
Panama's lottery tickets to be sold in the Zone. Further we
recommend that you approve in principle all of the measures
listed in IV D of the attached which would be implemented when,
after consultation with the treaty negotiator and with key
members of the Congress, it is believed that taking such steps
would advance the treaty negotiations. We consider all of these
actions to be desirable for improving the negotiating climate
and reducing our vulnerability to international criticism.
With respect to the questions pertaining to SOUTHCOM and
the proposed changes in the Canal administration, the Under
Secretaries Committee finds that further study on these matters
is required to determine the advisability of these changes. I
have directed therefore that such a study be undertaken and I
shall be in further communication with you in this regard.
Kenneth Rush
Chairman
Attachment:
Inter--Agency Review on Panama
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PANAMA CANAL TREATY NEGOTIATIONS
Nearly two years of negotiations with the present Gov-
ernment of Panama has resulted in very little progress to-
ward reconciling our widely divergent positions with re-
spect to a new canal treaty. The lack of progress has
contributed to tension in Panama as well as to frequent
criticism by that country and by other nations of our
"colonialist presence" and, to a lesser extent, of our
military presence there. It is timely, therefore, to review
this situation in order to determine how best to progress
toward a new, mutually satisfactory treaty, to minimize our
vulnerability to international criticism, to avoid the
emergence of a hostile posture on Panama's part, and at the
same time to avoid jeopardizing congressional acceptance of
a new treaty relationship with Panama. In this review we
must also keep in mind the objective of-keeping the-Canal
always open, efficient, and available at reasonable cost to
the world's users.
A. Their Current State
After six months of intensive negotiations, the U.S.
side presented in December 1.971 a comprehensive draft treaty
offer which provided for the continuation of-our rights to
operate and defend the canal for an extended-but specific
period and which at the same time took cognizance of Panama's
interest by returning to that country rights and properties
we no longer required. A year elapsed before Panama replied,
although Panama's negotiators had appeared to accept much of
the U.S. position. During the interim, the Panamanian negotiators
found that (a) General Torrijos was concentrating upon putting
his domestic house in order (the "elections" of August 1972) and
(b) Foreign Minister Tack and a number of his advisers believed
.that their negotiators' tentative concessions were too great
and the U.S. offer too little. These hard-lining nationalists
regarded as inadequate the 1967 draft agreements reached be-
tween representatives of previous Panamanian and U.S. govern--
ments and they insisted that a new treaty must reflect a sub--
.stantial improvement over the earlier drafts.
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When negotiations resumed in December 1972, it became
evident that this nationalist stance had become government
policy: Panama's counter offer proposed stringent curtail-
ment of our operational and defense rights in the short run
and their elimination altogether by the century's end. Our
negotiators found no signs of flexibility in this retrograde
Panamanian position. Thus we were at an impasse: the gap
between the two positions on major issues -- duration of a
new treaty, exercise of jurisdictional and defense rights in
the Canal area, and U.S. options to expand canal capacity --
appeared all but unbridgeable (Tab A).
Concommitantly it became clear that Panama had decided
to seek to wring concessions from the U.S. by marshalling
international sympathy for its charge that the U.S. maintains
a colonial enclave and excessive military presence'on Panamanian
territory. As a first step in this campaign, Panama publicly
revealed the detailed negotiating positions of both parties,
in violation of our mutual. understanding to. negotiate privately.
In doing so Panama sought to demonstrate that failure to progress
in the negotiations resulted from U.S. insistence upon thwarting
Panama's aspiration to "perfect its independence" by ending
U.S. colonialism.
Secondly, the hard-lining nationalists successfully maneu-
ered the United Nations Security Council.into holding a session
in Panama so that Panama's "cause" would receive world-wide at-
tention. A majority of the participants, some of them other-
wise friendly to the U.S., were critical of the extent of
our military presence and of our exercise of perpetual extra-
territoriality in the Canal Zone. Their attitude was reflected
\i_n their vote supporting a Panamanian resolution (only the UK
abstained) which we were forced to veto since it recognized
Panama's interests, but not ours. Although Panama did gain
some sympathy abroad, U.S. public opinion -- another Panamanian
target --- was generally unsympathetic to Panama's tactics. Never-
theless there is a strong possibility Panama will pursue its
efforts in international fora, particularly at the next General
Assembly where we cannot veto.
That the U.S. could effectively negate Panama's effort to
obtain meaningful treaty concessions through international
pressure.was not lost upon the practical General Torrijos.
Some intelligence reports indicate that he believes he was
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misled by Foreign Minister Tack and his coterie of nationalistic
advisers, and that the entire UNSC adventure had brought no
concrete results, only expenditure of scarce funds. Despite
having gained some international sympathy for its cause the
Panamanian government apparently has come to realize that its
goals were not thereby advanced, and may have adopted a more
conciliatory posture. It has turned down the volume of normal
anti-U.S. invective in the media it controls. In early May,
Foreign Minister Tack wrote to the U.S. negotiator in somewhat
softer tones and hinted at some negotiating flexibility. Later
that month in Buenos Aires Tack delivered a letter to Secretary
Rogers in which he once again, in a seemingly conciliatory
fashion, urged that detailed negotiations continue -- this
time on the basis of a set of principles which he proposed.
B. Future Prospects
Current indications are that Panama continues to
desire a new treaty and that General Torrijos is taking somewhat
greater personal. interest in the matter. He has maintained,
that in order to achieve a new treaty two steps are essential:
agreement at a very high level between the two governments as
to the basic principles that would.govern the new treaty re
lation hid.; (after -Which the negotiators would work out the
appropriate treaty language); and some unilateral measures
by the U.S. that would enable Panama-to be more forthcoming
in its position. Foreign Minister Tack's proposed eight
principles may be an outgrowth of Torrijos' views. Although
these principles mask serious differences between us, and
fully support Panama's known treaty position, there is much
in them that we can accept at the outset and we can attempt
to negotiate a mutually acceptable version. (Tab B shows the
difference between Panama's proposed principles and those the
USC believes are acceptable). Whether Panama actually has
adopted a more flexible approach requires further probing.
Negotiation of these principles offers one opportunity for
ascertaining Panama's intent.
In any event, we do not believe that substantial prog-`
ress toward agreement can be made rapidly. Even the most op-
timistic view of what Panama might agree to and the U.S. Congress
accept encompasses lengthy negotiations and intensive lobbying
with-the Congress.
As these extended negotiations play out, we can expect
mounting. Panamanian frustration. It could conceivably result
in forceful action against our presence in Panama, either
spontaneous or staged by T'orrijos.?We can also expect recurring
political attacks upon the nature of our presence in Panama
from both friends and enemies.
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In sum, the treaty positions between the two govern-
ments diverge significantly; there are some hints of flexi-
bility on the Panamanian side that require further probing;
we are in for a long process during which we can expect
a considerable amount.of international criticism to which
we are vulnerable; and there is no certainty the process will
end in agreement.
In light of the foregoing, we believe the U.S. should
continue its efforts to reach agreement with .Panama on a new
Canal Treaty while minimizing our vulnerability to international
criticism, keeping Panamanian tension within tolerable limits
and avoiding actions which would jeopardize congressional
acceptance of a new agreement. The following three options
represent different strategies for accomplishing this objective.
Three other options have been contemplated but ruled out
as likely to be counter-productive: (1) attempting to force
Panama into a settlement on our terms through economic sanc-
tions; (2) attempting to attract Panama into such a settle
rnent through large-scale economic largesse; and (3) retain-
ing in perpetuity our right to operate and defend the Canal
as well as our jurisdiction over U.S. citizens, while con-
ceding unilaterally and without Panamanian acquiescence all
else that we have offered Panama to date.
A. Continue as at present to negotiate seriously, in
an effort to draw Panamlacloser to our position
without further major concessions, and continue
our forthcoming attitude on non-treater related
matters such as economic and military assistance.
By selecting this option we would have decided that
Torrijos is testing the firmness of our negotiating position and
that eventually, once we have made a few more minor concessions
and he is convinced he can do no better,. he will decide that
something for his people is better than nothing and settle on
.terms only slightly more favorable to Panama than those we now
offer. We would also have decided that we would accept the risk.
of an outbreak of Panamanian hostility against the Zone due to
frustration over lack of progress.
Advantages:
(1). Would safeguard for the time being our essential
rights and properties.
(2) Would divest us of no major bargaining chips in
the negotiating process.
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(3) Might lessen over the short run the conceivable
risk of hostility emerging in Panama as a result of our forth-
coming attitude. on non-treaty related matters.
(4) Would be within our estimation of what the Congress
would accept.
Disadvantages:
(1) Would be based on the very slight prospect that
Torrijos would conclude a treaty not incorporating some major
U.S. concessions.
(2) Would over time raise the risk of forceful action
against the U.S. presence on the part of Panama.
(3) Would.not reduce our vulnerability to,world criticism.
D. Continue as at present to negotiate seriously without
further major concessions at this time; maintain our
for.thcominc ttitude_on non-treaty-related ratters such
as economic and military assistance; and take selected
uni.l_ai oral actions not regquT rir con rossional a-onroval
as well as nronose tr the Congress a selected qrouo o
unilateral_ c1.ct.i ons 7.equ ring its. approval,_ ~tiTlZenever caa:
ooraL:1o suchh acta.ons ~,,ou _d (1) i,m rove the general
negota.a.tirig atmosphere; or (2) obtain an aoproxim=tely
ecru%valent concession from Panama a in the treater ego
t;_ations; or (3) reduc -U.S. vulnerability to inter-
national criticism.
This option is based on the assumption that despite
lack of progress to date, there remains a reasonable chance of
reaching agreement with Panama on a new canal treaty. It is also
.based upon the belief that by making these unilateral conces-
sions Panama might become more flexible in its position. it
recognizes that in order to reach agreement with Panama, however,
greater flexibility in the U.S. treaty position will eventually
be required as well.. Hence, unilateral US action to make some
of the overdue changes in the Canal. Zone should proceed regardless
of failure to.r.each early agreement. These actions would serve
to reduce our vulnerabilities, both in Panama and internationally,
even in the absence of negotiating progress.
Three categories of unilateral actions are proposed under
this option:
(1) those listed in this report that can be accomplished
by Executive action (less IV C 23, 24, and 25).
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(2) those measures listed in the report requiring con-
gressional action which are not expected to encounter serious
congressional opposition (IV B 5, 15, 16, and 17),
(3) those listed in the report that are expected to
encounter resistance in the Congress but which would have signifi-
cant effect in the status of the Canal Zone (IV D 26, 27, and 28).
None of the proposed actions'go beyond what we have already
offered or been prepared to offer in the negotiations, nor do
they represent a large enough portion of our total treaty offer
to impair our negotiating position or our ability to continue
operating and defending the canal.
Implementation of each of the proposed actions would be on
an ad hoc basis, taking into consideration the progress of the
negotiations, the political atmosphere in Panarn.a, and the atti-
tude of the congressional leaders concerned with Panama policy.
Consideration of substantial changes in the U.S. treaty
offer would be deferred. until the results of the other proposed
actions are known.
Advantages:
(1) Might produce, through skillful use of unilateral
actions during the negotiations process, progress toward a
settlement safeguarding all our essential prerogatives and
thus maximizing chances for Senate ratification.
(2) Would preserve all of our major bargaining chips.
(3) Would avoid wide-spread, serious congressional
focus on and debate over the canal issue.
(4) Might relieve Panamanian tensions and help pre-
clude a potentially hostile posture.
(5) Would to some degree improve our international
posture.
Disadvantages:
(1) Might not be sufficient to reach an agreement..
(2) Would stimulate criticism from a numerically
limited.but vocal group of members of the Congress opposed
to any treaty alteration of our presence in Panama.
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(3) Would basically retain the status quo in the Canal
Zone by leaving unaffected jurisdiction, land, perpetuity,
the annuity, etc.
(4) Would give up some.of our bargaining chips.
(5) Might cause some morale problems among the personnel
of the Canal Company and Zone government.
(6) Might, if handled improperly, make Panama feel that
the U.S. is not serious about the negotiations.
C. Continue negotiations but with a substantially
ironed treaty offer. -
In selecting this option we would have decided that
the only means'of concluding a new treaty which would safe-
guard our vital interests in the Canal for an extended period
would be to offer significant new concessions either by inter-
preting existing presidential guidelines more broadly or seeking
liberalized guidelines. These concessions might include (a) a
reduction in the period of duration of the new treaty to 35 years;
(b) a rapid and complete return to Panama of civil and criminal
jurisdiction over non-U.S. nationals; (c) the return to Panama
of substantially greater land and water areas; and (d) the eli-
mination of our requirement for a firm option to build a sea-
level canal.
Advantages:
- (1) Would enhance the chances of a successful negoti-
ation.
(2) Would enhance our international prestige.
(3) Would go far toward satisfying Panama's aspirations
and thus contribute to an improved relationship with Panama.
.Disadvantages:
(1) Would increase congressional opposition, perhaps
enough to prevent treaty ratification, or, if it were ratified,
to prevent implementation of the treaty through appropriations
and other legislation. Congressional failure to ratify or ira-
plement a new treaty would cause a serious deterioration in our
-relationship with Panama.
(2)' Might still not be enough to result in a new treat%
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(3) Could complicate significantly our ability to
continue operating and defending the canal.
(4) Would forfeit the benefits of a sea-level canal.
IV. THE NATURE OF UNILATERAL U.S. ACTIONS.
In the second of the foregoing options the possibility of
unilateral U.S. actions is envisaged. Some of these actions
could. be taken by the Executive Branch alone, and others by
proposing legislation to the Congress. None of these would
affect the status quo in the Canal Zone. They fall broadly
into three categories: actions related to acknowledgment of
Panamanian sovereignty; actions related to U.S. operations
in the Canal Zone; and actions related to the U.S. military
presence in the. Zone.
Another category of actions, each requiring legislation,
would represent significant concessions to Panama and would
alter the status quo in the Zone. Each is, within the frame-
work of what we have already offered to Panama in the negoti-
ations or have been prepared to offer.
A. Actions Related to Panama's Sovereignty
1. Authorize the flying of Panamanian flags throughout
the Canal Zone and on commercial vessels transiting-
Currently Panama's flag is flown together with the
U.--S. flag at 18 sites on land, and we do not suggest to
transiting commercial vessels that they fly Panama's flag
in addition to our own as a matter of courtesy. This action
would involve flying the Panamanian flag in a position not
superior to our own.
This action could be taken by the Executive.
Advantage:
(1) Would be an action of unusal significance to Panama
because it was the issue of flags which catalyzed the 1964 riots.
Disavantagcs :
(1) Would encounter some hard-core congressional and
public opposition.
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(2) Could lead to some conflict with Panama over the
positioning of flags which would be difficult to resolve in
view of U.S. legislation.
2. Authorize implementation of Joint U.S.-Panamanian
olice_patrolswithin the Zone.
Panamanian police would have no power of arrest.
This action could be taken by the Executive.
Advantages:
(1) Would strengthen not only Panama's sense of sov-
ereignty but also its sense of increasing participation in the
life of the Canal area.
(2) Would be well-received internationally.
Disadvantage
(1) Would. cause hard--core congressional opponents to
object to what they would likely interpret as being an exercise
by Panama of jurisdictional functions in the Zone.
B. Actions Related to U.S. Operations.
3. Authorize private and public use by Panama,
in conf,-ormz.ty with applicable U.S. legislation,
of piers anddr docks .arid otheri.nfrastr_ucture
facilities, as well as of land and water areas
and a .rf fields ,~ which are in excess of U.S. re-
au_____ nt.
Though we cannot transfer these resources out-right
without legislation, the Executive could authorize their use
by Panama. however, Panama's use of these resources would he
made difficult by disparities between Panama's wage levels and
the higher U.S. ones which Panama would have to adhere to in
,the Zone, and by the fact that U.S. courts would retain juris-
diction in natter. s arising from Panama's use. of the resources.
.Advanta des.:
(1) Would benefit Panama's private-and public-sector
economies in terms of commercial-industrial expansion.
(2) Would somewhat lesson Panamanian unemployment., now
a. contributor to tensions.
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Disadvantages:
(1) Might not be accepted by Panama because of dis-
parities between Panamanian and Canal Zone wage rates, and
court systems, and between technical, U.S. standards of operation
and Panamanian ones.
(2) Would raise with hard-core congressional critics
the spectre of Panamanian "competition" and use of rights formerly
reserved to the U.S.
(3) Would pose problems of security and access.
4. Require use of Pana-manian license plates on private
vehicles' of all residents of the Canal Zone at cost
of manufacture and adm nnistration.
Currently all residents of the Zone receive Canal
Zone plates for their private vehicles at reduced cost and
little inconvenience.
This could be accomplished by Executive action.
Advantage:
(1) Would benefit Panama's sense of sovereignty.
Disadvantage:
(1) Would lead hard--core congressional. critics to
regard this as another chipping away at the U.S. privileged
position.
5. Authorize elimination of the Zone's postal system
and est.ab l iment of an APO for off icia.l mail and
use byauthorized Personnel, allowing Panama to
handle other mail in the Canal Zone.
Currentl..y the Canal Zone government issues its own
stamps. This would probably require congressional. action.
Advantage:
(1) Would benefit Panama's economy.
Disadvantages:
(1) Would cause complaints from Zone inhabitants as
a result'of inferior Panamanian service.
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(2) Would lead to some hard--core congressional criticism.
6. Direct increased elective instruction in all Canal
Zone schaolsof the Spanish language and Panamanian
culture and history.
This action could be taken by the Executive.
Advantage:
(1) Would be welcomed by Panamanians, particularly those
opinion-leaders whose children are in Zone schools.
Disadvantages:
(1) Would involve additional costs for school authorities.
(2) Would lead to some hard-core congressional criticism.
7. Authorize the fullest implementation of policies aimed
at: _ittaxiini zing em~,l.oyment oph ortunitie,s in the Zone fs
Panaman_i an nationals, on, a totally non-di.scrimninatory
basis
These policies have encountered resistance from labor
unions and American employees.
.,This action could be taken by the Executive.
Advantages:
(1) Would benefit Panama's economy, in which unemploy-
ment is widespread, through increasing the number of jobs for
Panamanian nationals in the Zone.
(2) Could facilitate the eventual transition to Pan-
amanian Canal operation.
Disadvantages
(1) Would be difficult to implement because there is
some paucity of technically-qualified Panamanians, though that
might be remedied by intensified Canal Zone training programs.
(2) Would be resisted. by American employees and their
objections would reach the ears of congressional critics.
(3) Would decrease the U.S.' ability to operate the
Canal in an emergency.
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8. Authorize establishmenf of a Joint Commission with
Panama to study the resolution of urban problems
created Ly the Zones, presence.
The Zone cuts Panama in two parts and severely cir-
cumscribes normal urban growth.
This action could be taken by the Executive.
Advantages:
(1) Would help ameliorate problems caused in large measure
by the presence of the Canal Zone.
(-2) Would involve Panamanians more with the Canal area,
which should help in the transitional period.
Disadvantac :
(1) Might be rejected as U.S. gimmickry by Panama.
(2) Would be viewed by congressional critics of the
hard-core variety as an open invitation to Panama to move in
on portions of Zone land.
- (3) Would. require congressional transfer of land areas
to permit full implementation.
9. Direct the termination of the Cana]. Zone Bus
Servi.ce asT an r merican-owned pr_:ivate enterprise
2per_at1ng in the Zone by cancellation of its
license by Canal ,one Governor.
This action can be taken by the Executive.
Advantages:
(1) Would allow a. Panamanian commercial enterprise to
provide a needed service in the Canal Zone.
(2) Would remove an irritant. from the relationship be-
tween the Canal. Zone Government and the Panamanian government.
Disadvantages :
(1) Would be difficult to implement since U.S. minimum
.wage laws would apply to those Panamanian buses servicing the
Canal Zone. The Panamanian government might object to this, but
without congressional action it cannot be avoided.
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(2) Might lead to criticism from hard-core congressional
critics.
10. Authorize the Canal Zone Governor to solicit
appointment of a Panamanian liaison officer
to the Canal Zone Government/Panama Canal Company.
This action could be taken by the Executive.
AdvantaV es :
(1) Would improve the U.S. image through having a Panamanian
actively associated with Canal operations.
(2) Would be responsive to the Panamanian desire to par-
ticipate in Canal administration.
(3) Would be an indication of a forthcoming U.S. attitude
with respect to a partnership with Panama.
Disadvantac es :
(1) Might elicit Panamanian complaints that the liaison
officer had no real voice in canal operations/administration.
(2) Could result in claims by Canal. Zone residents and
hard-core Congressmen that the U.S. had made a major concession
to Panama.
11. Authorize the Governor _to rec~ua_re the withholdin
of Panamanian income tax from emnl.oyees ofnrivate
businesses in the Zone who are sect to Panamanian
taxation.
This action could be taken by the Executive.
Advantages:
(1) Would aid Panama's economy through collection of ad-
ditional taxes at no cost to the Panamanian government.
(2) Would improve the U.S. and Canal Zone Government's
image by demonstrating positive cooperation with the Panamanian
government.
Disadvant ae:
(1) . Would make some employees who previously had not been
paying taxes unhappy.
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(2) Might lead hard-core congressional critics to term
such a practice unlawful and challenge the Governor's right to
collect taxes for a foreign government.
12. Authorize Panamanian National Guard use of the Cane
Mala and the Ancon' Cove parcel of Tabu Island for
traininguoses .
This action can be taken by the Executive, but it
could require legislative action if the Panamanians do not
agree to Canal Zone Code firearms permit requirements.
Advantage:
(1) Would demonstrate U.S. willingness to cooperate with
Guard authorities.
Dis advanttaac e :
(1) Would be difficult to implement if the Guard balked
at compliance with U.S. law which requires that firearms be
registered as they enter the Zone.
13. Authorize establishment of selected Panamanian com--
mere_ia.l ^c iii er_pr ses~in. t~ze_Canal Zone.
This action can be taken by the Executive.
Advantage:
(1) Would benefit Panama's economy.
Disadvantages
(1) Could cause some complaints from zone residents as
a result of inferior merchandise/services.
(2) Might cause some congressional criticism.
14. Authorize Panamanian use of Fort Sari Lorenzo as a
tourist attraction.
This action could be taken by the Executive.
Advantages:
(1) Would enhance the U.S. image.
(2) Would increase contact between Panamanians and Americans.
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 Approved For., Release 2006/11/02 : CIAO-00803R000400040002-9
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.1
Disadvantage:
15. Authorize Transfer of Old France Field to Panama
for ex ~nsion'-of_ the Colon Free `Lone.
Panama has long sought an area to expand the Free Zone.
This would require congressional action.
Advantages:
(1) Would benefit Panama's private economy very substan-
tially in terms of commercial expansion and employment creation.
(2) Would increase contact between Panamanians and Ameri-
cans.
Disadvantage:
(1) Would encounter some congressional opposition.
16. Authorize exclusion of the Canal Zone minimum wage
coverage, and. vOccuua itiona.l Safety and THeal Lh Act, with
rCSC Ct^onon ^TT_S.C1t1ZenSin priVatE'.bUs1nCS5.
This would require congressional action.
Advantge:
(1) Would eliminate the main deterrent to Panamanian
business enterprises being established in the Canal Zone.
Disadvantage:
(1) Would occasion congressional opposition.
17. Authorize sale of Panamanian lottery tickets in the
Zane (exc~on def ense sites )
This would require congressional action.
Advantages:
(1) Would contribute to Panama's economy.
(2) Would enhance relations with Panama.
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 Approved For Release 2006/11/02 : C-2-008038000400040002-9
16 -
Disadvantage:
(1) Might give rise to some congressional and public
criticism.
18. Authorize the transfer to Panama of the nro,perties
and buildings thereon formal y occupied by the U.S..
Consulate in Colon Ci-t.
The U.S. has no further use for this facility and has
been unable to sell it. Panama desires the.property for ex-
pansion of the Colon Free Zone or for use as a school.
This action could be taken by the Executive.
Advantages:
(1) Would contribute to alleviation of a problem in
U.S.-Panamanian relations.
(2) Would constitute a significant gesture to Panama.
(3) Would reduce excess U.S.G. property.
Disadvantages:
(1) Might involve some legal complications in im-
plementation.
1-9. Direct that those civic action/communityrelations
programs now conducted in Panama bT the military
be Banded .
The Armed Forces have an on-going civic action/com-
munity relations program which is carefully coordinated with
a GOP. representative to be certain that Panama approves of
the projects, but some expansion is desirable.
This action could be taken by the Executive.
Advantages:
SECRET
(1) Would provide positive and high impact programs
which show the recipients (usually lower class Panamanians)
that the U.S. is interested in improving their_ lives.
(2) Would provide training in civic action for other
Latin American military students attending training facili-
ties in. the Canal Zone.
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 SECRET
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- 17 -
(3) Would provide a "people-to-people" atmosphere be-
tween the Panamanians benefitting from the program and the
U.S. personnel involved.
Disadvantage:
(1) Might require additional funding.
20. Direct the establishment of a Joint U.S.-Panamanian
Military Co mittee to discuss and solve matters of
mutual interest relating to protection and defense
of the Canal.
This action can be taken by the Executive.
Advantages:
(1) Would provide Panama a voice in matters of mutual
military interests.
(2.) Would cement ties between the two Armed Forces.
(3) Would further demonstrate to Torrijos that the U.S.
is willing to consult with. Panama on matters of importance
to both countries.
Disadvantage.:
(1) Might occasion some criticism from hard-core con-
gressional elements who could term such-action as a breach of
security with respect to the Canal.
21.' Establish a Joint Panama-U.S. committee on procure-
anent of Pana.manian products for resale in the Canal
.zone.
This action could be taken by the Executive.
Adtirantage :
(1.) Would provide a mechanism to enhance Panama's busi-
ness interests and. economy through increase sales of Panamanian
products.
Disadvantage :
(_l)` Would occasion some criticism from local U.S. per-
sonnel.
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 Approved For Release 2006/11/02 ? P82-00803R000400 002-9
18 -
22. Authorize approaching Panama concerning the training
and equi ing.of an engineer detachment for civic
action type of operations by the National Guard.
Organization, training, and O&M funds levels have
been programming starting in FY 75. Final approval is needed.
This action can be taken. by the Executive.
Advantages:
(1) Would provide Panama with.a unit which could execute
high impact and helpful civic action projects such as road
construction, light bridging, well drilling,'etc.
(2) Would enhance U.S.--Panamanian relations by giving
Torrijos a unit which would improve his image in the interior.
Disadvantage:
(1) Might cause some criticism from certain sectors of
U.S. and Panamanian society of the-U.S. providing military
assistance to a "military government."
C. Actions Related to the U.S. Military Presence
The Interagency Group considered three actions in this
category:
23. Transfer the Southern Command from the Canal Zone.
24. ppoint a Civilian to head the Canal Zone Govern-
ment.
25. Transfer responsibility for administration of the
Canal and Ganal. Zone from the Department of Arrr.:
to the Department of Transportation, the 11ari ti_-~.
Adrna-ziisttrat-iion, or to a newly-created au~.oczaou
enti. t
Thorough discussion of those items revealed basic dis-
agreement, essentially between the Departments of State and
Defense, and it was decided that further study of these questions
was required before recommendations could be. made as to the
desirability and feasibility of taking such measures.
D. Actions Related to More Major Concessions to Panama
The measures described below are also desirable and
would require congressional approval. Because they involve
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 SECRET
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- 19 -
somewhat greater unilateral concessions than those described
above, they risk engendering greater congressional controversy.
Such controversy could adversely affect the negotiations and
therefore they should be implemented only after consultations
with the treaty negotiator and with the Congress to ensure that
taking these measures would advance rather than hinder.the nego-
tiations. These measures, which require further study and
agreement between the interested agencies on the exact composi-
tion of each, are:
26. Propose legislation to transfer the following
Canal. Zone land and-facil ties to Panama.
selected portions of the previously-offered
undeveloped land areas in the vicinities of
Panama City and Arraijan
Shaler Triangle
Rainbow City
one or two piers at Cristobal
27. Propose legislation to authori-Ze the application of
Panamani_a.n l w _by Pana.man.ian courts incertain civil
in the Canal Zone .inyoly].ng on=V
_-.._.
Panamanian nationals.
28. Propose legislation to increase the annuity to Pana::?a
substantially, although by a lesser amount than has bean
offered in negotiations. 1/` -
l/ OSD does not concur with the proposal. in item 28 con-
cerning the substantially increased annuity. Non-concurrence
is based on the fact that the monetary amount of the annuity
is a major U.S. Quid and should be offered only within the
framework of the negotiations. It is felt that this exceeds
the scope of the concept of taking small unilateral actions
to improve the atmosphere of negotiations.
SECRET
AR.A. Inter-Agency Group
July 10 , 1973
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 Approved For Release 2006/11/02 : CIA-RDP82-00803R000400040002-9
THE US AND PANAMAN177N NEGOTIATING POSITIONS ON JOR
ISSUES, AS THEY EMERGED DURING THE 1971-1972 TALKS
The Panamanians are asking for a new treaty which
would terminate no later than 1994 with a possible short
extension if the US expands the canal's capacity. They
want full jurisdiction over the canal area no later than
five years after the signing of a treaty. They would grant
the US use of very limited land and water areas for the ex-
clusive purpose of operating, maintaining, and protecting
the canal.
Panama would have primary responsibility for the
protection of the canal from local threats, in cooperation
with the US. Defense from external threats would be multi-
national and conducted from outside Panama. US forces
in the area would be strictly limited.
The new treaty would stipulate a five-year limi-
tation on an option for the US to build either a sea-
level canal or a third set of locks. Finally, Panama
would expect greatly expanded financial and economic
benefits from the canal under the new trea.ty (Panama's
negotiators have hinted at $50 to $100 million a year)
The US Position
The US is willing to abrogate the 1.903 treaty and
devise a new treaty relationship. It wants a treaty
that would last about 50 years, with options.to extend it
35 years from the completion of construction if third locks
are built or 40 years if a sea-level canal is built. But
it wants an open option (beginning in 15 years at the
earliest and extending possibly up to the end of the
century) to decide on whether and how to expand the capacity
of the canal.
In any case, the US wants to retain certain jurisdiction-
al rights in order to operate, maintain, and protect the
waterway during the life of the treaty. Panama would
gain immediate jurisdiction in criminal and civil cases
involving only Panamanians in.the canal area, but most
other types of jurisdiction would be passed, to the Pan--
aman.ans over a transition period of up to 15 years,
SECRET
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 Z7 L' Lti. l'
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e.g., joint patrols with the Guardia Nacional during the
transition period, after which Panama would get exclusive
police authority. The US would still retain the right to
maintain security guards around US property and employee
residences, as well as certain other rights directly con-
nected with canal operations.
There. would be a substantial reduction in land and
water areas used by the US in operation, maintenance, and
protection of the canal, and even these lands could be
opened to Panamanian development with US consent. The US
would retain the right to defend the canal in peace or war,
the power of decision in this area remaining with the US.
Finally, there would be a substantial increase in
financial benefits to Panama from the operation of the
canal, i.e., a royalty on tonnage amounting to some $20-
$25 million annually at present traffic rates (compared
with a $2.1. million annuity at present) and the expectation
of steady growth in. income to Panama during the life of the
treaty. .
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00400040002-9..
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-Approved For Release 2006/11/02 : CIA-R?P82-00803R000400040002-9