CONTROL OF THE PANAMA CANAL

I would, if I may, like to pursue the chairman's line of questioning further, to the extent to which we attempt to estimate what cost the U.S. Government must pay to maintain its present status in the Canal Zone.

For example, General Mather testified before this subcommittee that there is a deep undercurrent of resentment against U.S. sovereignty. He went on and called it "latent hostility," and I wonder, Mr. Flood, if you can envision an accommodation that could be formu

lated which would leave the United States in effective control of the canal for many of the important reasons you have outlined, but at the same time, be responsive to many of the Panamanian complaints, and avoid the kind of confrontation there that has characterized our overseas military presence in so many parts of the developing world, in view of the altered international situation.

I share the implicit concern, I think, that the chairman expressed when he talked about the extent to which conceivably a continuation of U.S. presence, no matter how effected, might well in fact prove to be far more successful in implementing Soviet interests in that area, to the extent to which it contributes to a continuation of this unrest, and as a symbol of American "colonial imperialistic presence," and so forth; and I wonder in view of this kind of problem that we face there, and face with regard to our military presence elsewhere in the world, if you could conceive of a way in which we could work out an accommodation that is more compatible with the modern world. Mr. FLOOD. Well, let's see if I can give an analogy.

I indicated the Soviet intent, and it is a naked intent, there is no secret there. They have been talking about it for 40 years, about interoceanic communications.

But the Suez is not in Central America. Neither is the Kiel. The Panama Canal is. The Panama Canal is the jugular vein of the hemispheric defense, and say what you will, and with all the poses that they strike, in many of these Latin countries--and the smaller the country, the more elaborate the uniform-you know as well as I that anybody who strikes the Western Hemisphere at any part of it strikes us. This is hemispheric defense.

This, I repeat, is the jugular vein for such defense. We have experienced problems with the Pacific before. We had two divisions, one through the canal, one en route, when World War II ended.

You have this can of worms in South Vietnam or Southeastern Asia, whatever it is going to be, and I can envisage, as can you, that part of the Communist chain from Australia through the Islands through Alaska, and we must have a zone of defense to fall back on, what? The Philippines? The Islands? Maybe back to Hawaii.

Now, the canal is a means not only of economic communication, which was the real basis for its birth-the defense structure has developed since then, with the development of this Nation-but to work out an accommodation, why, of course, you are a legislator, your business is the art of compromise, to work out; but when you say that there is unrest in Panama, that has nothing to do with the canal. There would be unrest in Panama with or without this canal, with a new sealevel canal, with a half dozen canals. Panama is that sort of a place. It is unfortunate, as is Poland. Its worst enemy is geography. And there she is.

SITUATION CHANGED SINCE 1903 TREATY

Mr. CULVER. Would you not agree that the ability of the United States to maintain its control and its influence and protect all its very real military and strategic and economic interests there, as originally envisioned in 1903, is markedly different than the world in which we are required to operate today. Further, that Panama today, politically speaking, is an entirely different atmosphere in which to work out relations with this hemisphere generally?

Mr. FLOOD. I would like to borrow your argument. The only thing wrong with your argument is that I didn't think of it. That is the strongest statement I have heard made at this_table_today for my position. Precisely. It isn't 1903, it is 1970, and the horizon-there is no horizon. The situation has changed but has changed for the worse. Instead of surrendering the Canal Zone, it should be extended to include the entire watershed of the Chagres River.

Mr. CULVER. Wouldn't that call, though, for an entirely different formulation with regard to U.S. presence and the nature of it and the extent of shared control and influence, on something as sensitive to their own national interest?

Mr. FLOOD. I am very fond of these people. I have known them all my life. When you say they are "Gringo, get out!" types, that is not the people of Panama. You go to the Indians. You have trouble in the city. You have troubles in all cities. We have them within two blocks of here.

Panama City is not Panama. "Have you ever been to the United States?" I say to an Englishman; "Oh, yes, I have been to New York." And somebody says to me, "Have you ever been to China?" "Yes; I was in Shanghai."

Now, New York is about as much America as Shanghai is China. The city of Panama is not the people of the Republic of Panama.

Mr. ČULVER. But you take the recent example, if we could turn to it for a moment, you mentioned the South Pacific. Take the case of Okinawa, and the recently concluded arrangements there, concerning the revised nature of U.S. continued military presence on that particular

Mr. FLOOD. I have no quarrel with that whatsoever.

Mr. CULVER. And the direct correlation and link-up to the domestic political consequences within the nation of Japan in the absence of making some sort of a modification, even though admittedly, we would argue that in the abstract, it is contrary to our national interest.

Mr. FLOOD. I agree, I agree, but there is the development of time, and we can see the element of time there.

And our need is at this time. I find no quarrel with that. I wouldn't do it, but I find no quarrel.

But I see no analogy with my jugular vein, my southern flank, wide open.

Mr. CULVER. I think the analogy I would submit might be that this was a very enlightened accommodation, very much in the strategic national interests of the United States, and in the absence of which, an alteration of that kind or similar to it, we ran the very real risk, in case of a major confrontation with China, for example, or some

other situation in Southeast Asia, that we would be denied the utilization of even Japan itself.

In some mutual security endeavor, if we didn't work out some way to bring about a damping down of the political unrest that was being stirred up by this mutual security arrangement of Okinawa, and may well be responsible in bringing about the type of government in Japan, politically speaking, that would deny us the utilization or access of any facilities, which are of paramount importance to our national security interest. So turning again to Panama, is it possible at all, to your way of thinking, that if we continue to allow what is admittedly a source of friction and political instability and military instability to fester, without any initiative or enlightened concession by the U.S. Government, that this may bring about an increased likelihood that this very vital economic and military link would no longer be available to us a handful of years down the road?

Mr. FLOOD. Well, of course, this is a matter of degree. When you look at the original treaty, when you look at the arrangements with the Republic of Panama, when you look at the pots of gold that have fallen from this rainbow into this totally technologically ignorant, endemically unstable people, the employment rates, the thousands and thousands of people, Panamanians, that we employ, the wage scales they get, do you think those people want to see some of these Graustarkian generals in Panama take over that place?

Neither do we.

Mr. CULVER. Well, in terms of national pride and self-interest, which has a very irrational and emotional power all its own

Mr. FLOOD. Oh, yes.

Mr. CULVER. It is probably the most powerful

Mr. FLOOD. The Latino is very sensitive.

Mr. CULVER. Undoubtedly the most powerful political movement in the world today.

Mr. FLOOD. We have it here, in our country.

Mr. CULVER. But this chauvinism, therefore, I wouldn't underestimate, and, turning to cost, what do the Panamanians now get for the United States presence in the zone and U.S. control over the canal?

Do we have some figures?

Mr. FLOOD. Their very economic existence-period. Their life's blood. Their existence. We gave birth to them. We have nurtured them, trained them, educated them, fed them, paid them. In fact they call the canal their "lunch counter."

Mr. CULVER. Mr. Flood, do you think someone could possibly provide income figures for the record?

Mr. FLOOD. I would think so.

Mr. FASCELL. We either have it in the record or we will get it for you. The actual revenues, I think, are in the order of $212 million a year.

Mr. FLOOD. Just a few years ago

Mr. CULVER. But it is $2 million a year in the canal; their share of canal tolls, for example, is $2 million a year.

Mr. FASCELL. I don't remember the exact figure.

Mr. CULVER. That is the figure I am familiar with.
Mr. FASCELL. We either have it in the record, or will get it.
Mr. FLOOD. Oh, I think that would be excellent.

(The United States pays Panama an annuity of $1.93 million pursuant to the provisions of Article I of the 1955 Treaty of Mutual Understanding and Cooperation between the United States and Panama.)

Mr. CULVER. How much does the United States collect from toll fees?

Mr. FLOOD. You mean in dollars?

Mr. CULVER. Yes, sir.

Mr. FLOOD. Well, everything we collect, by the millions a year, we turn back to the General Treasury. The Canal Company and the Panama Canal Zone are two separate and distinct things. The zone is a governmental agency, and the company is commercial concern, operated on a self-sustaining basis.

Mr. CULVER. But does the U.S. Government

Mr. FLOOD. It all goes back to the U.S. Treasury. It is a self-paying thing; we do not subsidize this thing.

Mr. CULVER. That's the thing I wanted to bring out.
Mr. FLOOD. It is self-paying.

Mr. CULVER. The United States is making money now off the canal's operation; we don't subsidize it?

Mr. FLOOD. We never did, except the original investment. We have a $5 billion investment. But you can have that much in, no matter what you do. The fact remains that that investment is there.

But as far as the dollar by dollar, month by month, week by week, ship by ship, that washes itself out, and reverts to the Treasury. So in other words, there is no millstone around our neck, as a cost, as a debt of any kind. Moreover, U.S. isthmian activities, directly or indirectly, inject more than $100 million annually into the Panamanian economy.

Mr. CULVER. Thank you, Mr. Chairman.

Mr. FASCELL. Mr. Roybal.'

STANDARDS OF EMPLOYMENT IN THE CANAL ZONE

Mr. ROYBAL. Mr. Flood, the Panamanians that I have had the opportunity of talking to complain that there are two standards in the zone. Mr. FLOOD. The silver and gold standard?

Mr. ROYBAL. No, sir. That is the employment standards, that the Panamanians do not get the same salary doing exactly the same work as an American.

Now to what extent is this actually helping or hurting relations? Mr. FLOOD. Well, of approximately 16,000 employees of the Panama Canal, say, 12,000, as of this afternoon, are Panamanians; 4,000, say, are Americans. Now they are getting a wage scale, paid by us, far greater than what they would get for the same kind of work any place in Panama, for the Government or private contractor, doing the same kind of things.

Mr. ROYBAL. But the American who is doing exactly the same kind of work, then, is getting a salary that far exceeds the amount that a Panamanian receives?

47-893-70-15

Mr. FLOOD. That is only in certain categories, supervisory categories, although now in this last treaty we have brought into the supervisory categories at the highest levels many, many Panamanians under the treaty just a few years ago, and I see nothing wrong in that, if they are capable, and many of them are.

Mr. ROYBAL. Don't you think this should have started many years. ago, instead of just recently?

Mr. FLOOD. Yes, yes, of course I do. Of course, I do.

Mr. ROYBAL. Do you believe then that over the years, this particular situation perhaps is responsible for some of the unrest that exists in the zone?

Mr. FLOOD. Yes. Yes.

Mr. ROYBAL. And what can we do further to correct it?

Mr. FLOOD. Well, I think first of all, you should discuss this matter with your labor unions that exist there. There are problems within the labor unions, which I would be the first to want to sit with you, and be sure they were clear about it.

There is no intent on the part of this Government, of the Panama Canal Government or the Panama Canal Company to discriminate against the Panamanian merely because he is a Panamanian.

Mr. ROYBAL. But the truth of the matter is that he has been discriminated against.

Mr. FLOOD. The truth of the matter is that that has been improved a thousand percent, and up until a few years ago, 10,000 percent, and will be improved further, and should be.

Mr. ROYBAL. And maybe the net profits that are made both by the company and the zone have been as a result of exploitation that has been going on with regard to employment.

Mr. FLOOD. No, no. That is begging the question. No, this is not so. The maintenance of the operation of this canal has been one of the major engineering miracles in the history of man. That's what has done it. Efficiency, operations, maintenance and management, not mere hands.

You need those to do it, but to suggest that because this was an aggrandizement, that this was some great American corporation, who achieved its opulence in the mauve decade, by bleeding its workers— now nobody, I never heard that said, until this minute.

Mr. ROYBAL. Well, I have heard it said many times. And I have also

seen

Mr. FLOOD. What, the accumulation of funds by America, by the United States, after a $5 billion investment, was the result of making slaves out of the Panamanian workers?

Mr. ROYBAL. No, but that the profits that have been derived from that operation resulted from the exploitation of individuals who were paid less than the wages paid Americans.

Mr. FLOOD. Mathematically, I suppose it would work out. If one man gets $10 and another gets $5, then you are ahead $5 some place. I am sure that is so. Yes. But it is certainly not a causus belli. It is not a gut issue. It is certainly not one of the two things that is before this House on the sovereignty and the operation of the canal. There are many other things.

Mr. ROYBAL. But it is a thing that