cause of loss of spirit and morale. At that time, an engineer, Mr. Philippe Bunau-Varilla, who had worked for the French Canal Co., spurred an effort for the United States to take over the French company's assets and enter into a treaty with Colombia for the completion of the canal. Such a treaty was actually signed and unanimously rejected by the Colombian Senate.

At that point it was suggested that the province of Panama might undertake to declare its independence from Colombia and then enter into a satisfactory treaty with the United States. On November 4, 1903, a revolution occurred in Panama, and a few days later the United States recognized Panama's independence. Thereupon, a treaty was entered into known as the Hay-Bunau-Varilla Treaty, signed by that same French engineer who had worked for the French Canal Co.

This treaty, the one we now refer to as the Panama Canal Treaty, granted the United States rights in perpetuity to construct a canal within a zone 10 miles wide over which the United States would exercise, as the treaty says, the rights, powers, and authority it would have if it were the sovereign.

Secretary of State Hay, who signed the treaty, candidly wrote to a leading Senator that the treaty was, in his words, and I quote, "very satisfactory, vastly advantageous to the United States and, we must confess, with what face we can muster, not so advantageous for Panama." The treaty was ratified in 1904, and construction of the canal was begun immediately. It was completed in 1914, after a brilliant engineering and scientific performance by American engineers, doctors, scientists, and builders who were determined to conquer the unconquerable and make the canal a reality.

Today, the canal stands as an engineering marvel, as one of this country's greatest accomplishments. In a very real sense, it was indeed, as Senator Baker has said, our "Moon shot" of the early 1900's. Any American today must view with pride this highly complex, integrated hydraulic system of locks and dams and artificial bodies of water designed to move ships through the uplands of the isthmus for 50 miles from ocean to ocean.

And we can also point with pride to the way we have operated the canal. For 62 years it has been run as a public service for the nations of the world rather than as a business. Tolls have been set as low as compatible with meeting costs and providing a modest return, and world commerce has been a major beneficiary of our canal operation. It is worth noting, by the way, that the toll rate when the canal opened in 1914 was $1.20 per Panama Canal ton; today it is $1.29.

Now, while the canal has been a source of deep understandable pride to the United States, it has been a troubling and festering presence in Panama. Under the treaty, the United States established jurisdiction over the Canal Zone courts. It has established the zone's schools, jails, and its police force. It has set up what the Panamanians have regarded as a colonial enclave splitting their country in two and using 550 square miles of their best land, and the Panamanians have made known their resentment at the United States having done so pursuant to a treaty which was not even signed by a Panamanian. It is against this backdrop, I submit, that these treaties must be evaluated.

ARGUMENTS ADVANCED AGAINST NEW TREATY ARRANGEMENTS

Now, several arguments have been widely advanced against a new treaty arrangement with Panama. Secretary Vance has already discussed several of them, and I would like to touch upon a few of the major concerns which have been asserted in connection with these new treaties.

First, the predominant question: will the new treaties in any manner prejudice our national security? Your committee will, of course, have the benefit of the testimony of our foremost defense authorities, but it is important to stress that in all of our negotiations we have worked very closely with the Department of Defense and the Joint Chiefs of Staff to assure that our national security interests will not in any respect be prejudiced by these new treaty arrangements, and we have been assured by them that the treaties we have agreed upon will not only preserve but indeed enhance our national security interests.

Secondly, will the new treaties seriously affect U.S. commercial interests? The new treaties, we believe, are the best protection of our commercial interest in the canal. The simple fact is that the commercial value of the canal has diminished considerably as world commerce patterns and technologies of shipping have changed. Today, supertankers and other large vessels cannot use the canal. In percentage terms, the canal is much more important to various countries of Latin America than it is to us. Today, about 7 percent of total U.S. international maritime trade passes through the canal each year. About 4 percent of our trade between the east and the west coasts traverses the canal.

So, it is clear that although the canal is still important, it has to a substantial extent become commercially obsolescent.

Third, a question we hear frequently: is the present Government of Panama the one with whom we should be negotiating these new treaties? For over 13 years now, as you have heard, we have been engaged in negotiating a new Panama Canal treaty. The present Chief of Government, General Omar Torrijos, who has been in power for almost 9 years, has been committed to trying to work out a new treaty with the United States. In doing so, he is supported by the people of his country and is following in the footsteps of every Panamanian head of state since 1903, regardless of ideological differences.

Moreover, pursuant to the Panamanian constitution, these treaties will now have to be submitted to a plebiscite in Panama next month. so that the Panamanian people will be able to express their judgment with respect to these treaties.

NEUTRALITY TREATY

Mr. Chairman, Secretary Vance and Ambassador Bunker have already described to you the major terms of the new Panama Canal treaty, and I want to focus my remarks particularly upon the neutrality treaty. This treaty, as you know, commits the United States and Panama to maintain a regime of permanent neutrality for the canal. Under the rules of neutrality set forth in this treaty, the canal is to be open to merchant and naval vessels of all nations at all times with

out discrimination as to conditions or charges of transit. A special provision authorizes United States and Panamanian warships to transit the canal expeditiously in both peace and war and without being subject to any restriction as regards means of propulsion, armament, or cargo.

Under this provision no question can be raised about the right of a U.S. naval vessel to transit the canal with all its weapons, nor can any restriction be placed on the type of cargo it may carry. Further, we are assured of a preferential right to expeditious transit of our naval vessels whenever we consider this necessary.

Under the treaty, the United States is in a position to assure that the canal's permanent neutrality is maintained, and there is not, as Secretary Vance has said, any limitation on our ability to take such action as we may deem necessary in the event the canal's neutrality is threatened or violated from any source. The precise type of response we might determine to make would, of course, depend upon all the political, military, legal, economic, and other factors involved in a particular situation, but the key point is that it is for the United States to make the determination as to how we should respond and how we should defend our rights under the canal's regime of neutrality. Thus, the treaty provides for the United States maximum freedom to determine how to carry out its responsibility for canal neutrality. We are under no obligation to consult with or seek approval from any other nation or international body before acting to maintain the neutrality of the canal, nor the treaty in any other way limit our ability to act.

This permanent neutrality treaty will also apply to any other international waterway that may be built in Panama in the future. In short, the neutrality treaty provides, we believe, a firm foundation for assuring that our long-term interest in the maintenance of an open, accessible, secure, efficient canal is preserved now and in the future.

In order to emphasize the importance of the regime of neutrality to world shipping, there is a protocol to the neutrality treaty which will be open to accession by all the countries of the world. The signatories to this protocol will in effect endorse the neutrality treaty by specifically associating themselves with its objectives and by agreeing to respect the regime of neutrality of the canal both in time of war and in time of peace. The Instruments of Accession will be deposited with the Secretary-General of the Organization of American States.

The lasting and deeply significant implications of this treaty have been fully recognized by the Panamanians. In signing the treaties at the Pan American Union here in Washington on September 7, 1977, General Torrijos clearly told the people of Panama, the people of the hemisphere, and the people of the world: "We have agreed upon a neutrality treaty that places us under the protective umbrella of the Pentagon. This pact could, if not administered judiciously by future generations, become an instrument of permanent intervention."

Both countries recognize that this treaty is designed not only to assure that our own interests will be fully preserved but to assure the other countries of the world that the United States will be in a position to do whatever may be required in the future to preserve the openness, security, and accessibility of the canal.

IMPORTANCE OF STUDYING TREATIES

It is vitally important that the American people study these new treaties carefully and openmindedly and recognize what is at stake. The issues involved are far too complex and significant to be compressed into a slogan or reduced to the size of a poster. In these agreements we believe we have a rare opportunity to demonstrate to the world how a large nation and a small nation can settle their differences amicably and with mutual respect and enter into a lasting partnership of which future generations will be proud. They will bear witness to our intention to build a balanced, constructive, and lasting relationship among the countries of this hemisphere and throughout the world. President Theodore Roosevelt, I think, put it very well. He said, "We have no choice as to whether we shall or shall not play a great part in the world. That has been determined for us by fate. The only question is whether we will play that part well or badly."

Thank you, Mr. Chairman.

[Ambassador Linowitz's prepared statement follows:]

PREPARED STATEMENT OF HON. SOL M. LINOWITZ, CO-NEGOTIATOR, Panama Canal

TREATIES

Mr. Chairman and members of the committee, although I have not been involved in Panama Canal diplomacy for as many years as Secretary Vance and Ambassador Ellsworth Bunker, I have for a long time been deeply concerned about the Panama Canal issue and its implications for our whole relationship with Latin America.

For three years prior to my designation as Co-Negotiator of the new Canal treaties, I served as Chairman of the Commission on United States-Latin American Relations.

In the Report which our Commission issued on December 20, 1976 we said: "The most urgent issue the new Administration will face in the Western Hemisphere in 1977 is unquestionably the smoldering dispute with Panama." We went on to say: "1977 will be a crucial year for resolving the volatile Panama issue; if negotiations do not produce an equitable solution during this coming year, deepened hostility seems inevitable." We urged the new President "to exercise prompt, vigorous and decisive leadership in negotiating an acceptable compromise with the Panamanian Government while serving our own interest in the Canal. Such an action will also indicate our desire to address the issues which concern the United States and Latin America in a more cooperative and mutually respectful atmosphere."

Our recommendation was: "The new Administration should promptly negotiate a new canal treaty with Panama; it should involve members of both parties and both Houses of Congress in the negotiations; and it should make clear to the American public why a new and equitable treaty with Panama is not only desirable, but urgently required."

Mr. Chairman, the treaties which we have negotiated and which are now before you in large measure follow that prescription. We have negotiated treaties which, we believe, are fair and equitable and which fully preserve our interest in the canal while taking into account Panamanian aspirations. In the course of the negotiations, we have indeed involved members of both parties and both Houses of Congress. And the terms we have agreed upon clearly reveal a more cooperative and mutually respectful atmosphere in hemispheric relations. There are. I believe, three basic facts which must be understood about the Panama Canal issue.

First, it is an issue which involves far more than relations between the United States and Panama, for it is an issue which affects all United States-Latin American relations. In the eyes of our Latin American neighbors, the Panama Canal runs not just through the center of Panama, but through the center of the Western Hemisphere. All the countries of the hemisphere have therefore made common cause in looking upon our position in the canal as the last vestige of a colonial past which evokes bitter memories and deep animosities. So in going

forward with these new treaties with Panama, the United States will be improving its position with virtually all the countries of this hemisphere whose attitude towards us as a nation will be importantly influenced by how we conduct ourselves on the Panama Canal issue.

Second, our primary interest in the Canal is, and always has been, to assure that it remains secure and open, on a neutral, non-discriminatory basis. Viewed in this light, it is unmistakably clear that the greatest threat to the operation and security of the Canal would be to try to insist upon retention of the present outmoded treaty and its anachronistic provisions-provisions which have in the past, and can so easily again in the future, trigger hostility and violence. The simple fact is that if we do not agree upon treaties which are mutually agreeable and acceptable, the time may come when we may find ourselves in the position of having to defend the Canal by force against a hostile population and in the face of widespread condemnation by the countries of Latin America and even the rest of the world.

Third, it is, therefore, clear that the best way to preserve an open, accessible and secure canal and to maintain its permanent neutrality would be to substitute for the 1903 Panama Canal Treaty a new arrangement which will be mutually fair, which will properly provide for Panama's just aspirations, and which will take into full account our own national needs. Putting it another way, a new treaty arrangement is the most practical means for protecting the very interests we are seeking to preserve in the Canal.

We believe that the new treaties meet this test by preserving for the nation the important interest it has in assuring that the Canal remains secure, accessible and open on a non-discriminatory basis-and in a manner which will both advance our national security interests and further our hemispheric objectives.

With your idulgence I would like to recall a few words of history about how we got where we are in the Panama Canal.

During the middle of the 1800's we were, as a young nation, interested in the possibility of constructing a canal across the isthmus in order to connect the Atlantic and Pacific Oceans. This need was dramatically underlined when, during the Spanish American War, it took the battleship Oregon 67 days to get from the Pacific coast to its Atlantic battle station.

At the end of the 1800's the French Canal Company had undertaken to construct a canal through the Province of Colombia known as Panama. By the end of the century it acknowledged failure-failure because of disease, because of technological and scientific problems which seemed unsurmountable, because of lack of financing, and finally because of loss of spirit and morale.

At that time an engineer, Philippe Bunau-Varilla, who had worked for the French Canal Company, spurred an effort for the United States to take over the French company's assets and enter into a treaty with Colombia for the completion of the canal. Such a treaty was rejected by the Colombian Senate.

At that point it was suggested that the Province of Panama might undertake to declare its independence from Colombia and then enter into a satisfactory treaty with the United States. On November 4, 1903 a revolution occurred in Panama and a few days later the United States recognized Panama's independence. Thereupon a treaty was entered into known as the Hay-Bunau-Varilla treaty. The treaty granted the United States rights "in perpetuity" to construct a canal within a zone 10 miles wide over which the United States would exercise the "rights, powers and authority" it would have if "it were the sovereign." Secretary of State Hay candidly wrote to a leading Senator that the treaty was "very satisfactory, vastly advantageous to the United States and, we must confess with what face we can muster, not so advantageous for Panama." The treaty was ratified in 1904 and construction of the canal was begun immediately. It was completed in 1914 after a brilliant engineering and scientific performance by American engineers, doctors, scientists and builders who were determined to conquer the unconquerable and make the canal a reality.

Today the Panama Canal stands as an engineering marvel, as one of this country's greatest accomplishments. In a very real sense it was our moon shot of the early 1900's. Any American must view with pride this highly complex, integrated hydraulic system of locks, dams and artificial bodies of water designed to move ships over the uplands of the isthmus for 50 miles from ocean to ocean.

And we can also point with pride to the way we have operated the Canal. For 62 years it has been run as a public service for the nations of the world rather than as a business. Tolls have been set as low as compatible with meeting costs