TRANSPORTATION COSTS OF CORN, WHEAT AND SOY BEANS FROM DES MOINES, IOWA TO JAPAN Note: Transportation costs developed from a fixture of September 1977 for a vessel of 33,700 DWT and 15,620 Panama Canal tons. Source: Foreign Agricultural Service, U.S. Department of Agriculture (Supplied by Department of Commerce). Senator CLARK. For corn and soybeans and wheat? Mr. CASEY. Based on a 25- to 40-percent increase in tolls? Senator CLARK. Yes. Let us say either of those or 30 percent. The reason I asked is that it becomes quite a major issue in our State as to whether a new Panama Canal Treaty which would probably require a 30-percent increase would have significant impact on our ability to compete in such areas as soybeans with Brazil or whether it would be a major enough factor to really cause us to lose part of that market to Brazil and it is probably more discussed in our newspapers than any other issue in regard to the Panama Canal. So it would be valuable to be able to cite specifics. You seem to say in your statement that the cost impact is so minor-you say forty-three one-hundredths of 1 percent on the average of all commodities. If that has some kind of equal comparability in feeds and feed grains it seems to me the impact would be quite minor, 7 percent. It might be significant in terms of where it goes or how it travels, but in terms of maintaining our ability to compete with other countries it would seem to be relatively minor. Is that a fair assumption or not? Mr. CASEY. I believe it would be relatively minor. I think the numbers I just cited from this one study here indicate it is relatively minor. I don't know exactly what a ton of corn costs. I think well over $100. Senator CLARK. A bushel of corn is $2. Mr. CASEY. There are 43 bushels in a ton. Mr. CASEY. A 30-percent increase in tolls would be somewhere around 40 cents. Senator SARBANES. Forty cents a ton or less than 1 cent a bushel. Thank you very much. EFFECT OF ALASKAN OIL Mr. CASEY. There is one other point I would like to make. I mentioned in my statement about the effect of Alaskan oil. I have not heard that mentioned, Mr. Chairman, in the testimony today. We anticipate that there will be at least 500,000 barrels of oil going through the canal in the short term. The length of time during which this movement continues depends upon if and when a pipeline is constructed to move oil from the west coast. This movement will produce about 20 cents a barrel in terms of canal tolls and services. The ships carrying this oil, of course, have to go through the canal fully laden and they have to come back empty, so they pay tolls twice. This is estimated to increase the revenue from tolls and services by in excess of $30 million dollars a year which is a relatively significant increase in revenue to offset the increase in annuity payments to Panama. Senator CLARK. It is your best thinking that will occur rather than, let us say, a pipeline being laid across the canal area or some other approach that might be used. Mr. CASEY. At the present time there is about 700,000 barrels a day coming out of the Valdez pipeline; 375,000 barrels a day are currently moving through the canal in ships. Accordingly, more than 50 percent of the total oil coming out of Alaska is going through the canal. And that is with pump station No. 8 out of action. Pump station No. 8 is supposed to be restored during the first quarter of next year, which will increase the volume to at least 1.2 million barrels a day. POSSIBILITY OF PIPELINE BEING LAID ACROSS CANAL AREA Senator CLARK. My question had to do with how they evaluated the possibility of a pipeline being laid across the canal area? Mr. CASEY. The most likely place for a pipeline is from California down to Texas. But that could not take place probably until 1982 at the earliest. Senator CLARK. There is no consideration then of a pipeline in the canal area? Mr. CASEY. It is one of the possibilities; but it is one of the more remote possibilities. Senator CLARK. We thank you very much for your interesting and very valuable testimony and the hearing is adjourned until Tuesday morning at 9:30 a.m. [Whereupon, at 2:10 p.m., the hearing adjourned, subject to the call of the chair.] [Senator Percy's questions for the record follow:] SENATOR PERCY'S ADDITIONAL QUESTIONS OF SECRETARY ADAMS 1. What can you tell us concerning any domestic impact of an increase in tolls of 30 percent or more? What U.S. ports would be most affected by shifts in traffic patterns? 2. Do you have some estimates of projected impact on shipping as tolls are adjusted upward? 3. Has the commercial importance to the United States of the Canal increased or decreased over the years? Is it true that with the advent of larger vessels which are unable to transit the canal, and the increased use of other means of transport, that the canal's usefulness has somewhat diminished? Is this a trend that we can expect to continue, or do you expect some shift back to smaller vessels? [As of the date of publication, the information requested had not been supplied.] PANAMA CANAL TREATIES WEDNESDAY, OCTOBER 19, 1977 UNITED STATES SENATE, COMMITTEE ON FOREIGN RELATIONS, Washington, D.C. The committee met, pursuant to notice, at 9:35 a.m. in room 4221, Dirksen Senate Office Building, Hon. John Sparkman (chairman of the committee) presiding. Present: Senators Sparkman, Church, Clark, Glenn, Stone, Sarbanes, Case, Javits, and Percy. The CHAIRMAN. Let the committee come to order, please. I always like to have both sides represented before we start our hearings, but we will have some members of the minority before long. As a matter of fact, our poll indicates that most of our members will be here this morning. I like for as many of us as possible to be here from the very beginning. However, I think we had better begin. OPENING STATEMENT We are pleased to have back with us this morning the two gentlemen most responsible for negotiating the Panama Canal agreements now pending before this committee. Our purpose in asking them to come back at this point is to give the members of the committee an opportunity to discuss with them the clarifying statement pertaining to the neutrality agreement, which was released after General Torrijos' brief visit to this country at the end of last week. On Friday, October 14, Mr. Linowitz delivered a copy of the statement to the committee, and we asked him if he and Ambassador Bunker would be willing to come up and discuss this matter in open session. Gentleman, we are pleased to have both of you back with us again. Does either one of you have a prepared statement? [Ambassador Linowitz nods negatively.] The CHAIRMAN. Very well. Can we be as specific as possible about the statement released last Friday? We would like for you to discuss that. I will offer some preliminary questions. What is the official status of that statement? I ask this because the statement delivered to the committee at that time bears no seal or inscription, nor is it signed by any Government official. I would be very glad if either one of you could clarify this matter and tell us what is the status of the statement that was delivered to us last Friday. [The statement of understanding follows:] STATEMENT OF UNDERSTANDING Under the Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal (the Neutrality Treaty), Panama and the United States have the responsibility to assure that the Panama Canal will remain open and secure to ships of all nations. The correct interpretation of this principle is that each of the two countries shall, in accordance with their respective constitutional processes, defend the Canal against any threat to the regime of neutrality, and consequently shall have the right to act against any aggression or threat directed against the Canal or against the peaceful transit of vessels through the Canal. This does not mean, nor shall it be interpreted as a right of intervention of the United States in the internal affairs of Panama. Any United States action will be directed at insuring that the Canal will remain open, secure and accessible, and it shall never be directed against the territorial integrity or political independence of Panama. The Neutrality Treaty provides that the vessels of war and auxiliary vessels of the United States and Panama will be entitled to transit the Canal expeditiously. This is intended, and it shall so be interpreted, to assure the transit of such vessels through the Canal as quickly as possible, without any impediment, with expedited treatment, and in case of need or emergency, to go to the head of the line of vessels in order to transit the Canal rapidly. STATEMENT OF HON. ELLSWORTH BUNKER, AMBASSADOR AT LARGE AND CONEGOTIATOR OF THE PANAMA CANAL TREATIES, DEPARTMENT OF STATE, AND HON. SOL LINOWITZ, CONEGOTIATOR OF THE PANAMA CANAL TREATIES, DEPARTMENT OF STATE, ACCOMPANIED BY LT. GEN. W. G. DOLVIN, DEPARTMENT OF THE ARMY, PANAMA CANAL NEGOTIATING TEAM Ambassador LINOWITZ. Mr. Chairman, the statement was not signed by either leader because it was a statement of understanding setting forth what President Carter and General Torrijos have always understood the treaties to mean. It was issued purely as an explanatory statement of their intention with reference to these treaties. The CHAIRMAN. I see. Very well. Let me ask a few questions. Other members will be coming in, and I know they will have questions for you, too. LIMITATION OF U.S. RESPONSE TO NEUTRALITY THREAT Will the terms of the statement limit in any way the steps that we could take to maintain the neutrality of the canal in the case of an attack by an outside force? Will the statement limit our response to a threat to the neutrality of the canal from the Government or people of Panama? Ambassador LINOWITZ. I'm Sorry, Mr. Chairman, but I did not quite understand the last part of your question. The CHAIRMAN. I said, will the statement limit our response to a threat to the neutrality of the canal from the Government or people of Panama? Ambassador LINOWITZ. No, sir. There is no limitation in this statement with reference to the action which the United States may undertake to counter any threat or aggression against the canal and its neutrality. The CHAIRMAN. Did we bring much of the disagreement over interpretation on ourselves by using the term "intervention"? I suggested to President Carter that I wished we could eliminate the term "interfere" or "intervention" altogether in any dealings with them. Ambassador LINOWITZ. Mr. Chairman, neither Ambassador Bunker nor I ever used the words "intervention" or "intervene." As a matter of fact, we always made very clear that the word would evoke images and memories that were resented very much in Latin America, and that the words in and of themselves were not the right ones for us to be using in any of our discussions. The CHAIRMAN. I wish we could eliminate it from our vocabulary regarding these treaties and not use it at any time. I do think there ought to be a clear understanding that we mean it when we say that we anticipate no interference in Panama's internal affairs, that we do not plan any intervention in her affairs. I hope we could use other language. Senator Church. Senator CHURCH. Thank you, Mr. Chairman. I have just been reading the latest dispatch from Panama. [Pause.] COMMENDATION OF WITNESSES AND PRESIDENT First of all, let me say how pleased I am at the effort you gentlemen have made and the President has made to clarify these two issues of rather crucial importance. The statement you have negotiated representing the view of the two Governments is a very important step forward, I think. It is most helpful to the committee and it will go far to resolve some of the doubts that had been created by the seemingly contradictory interpretations. PURPOSE OF LEAVING STATEMENT UNSIGNED I don't quite understand why the statement was not signed. Was there a purpose for leaving it unsigned? Ambassador LINOWITZ. The reason it was not signed, Senator, was because it was felt that it added nothing to the treaty itself, that it was a statement issued by the leaders of both countries saying "This is what we understand the treaty means." It was not felt there was any need for signing it as a separate document. INTENTION CONCERNING UNDERSTANDING Senator CHURCH. Is there any intention, to your knowledge, of adding this understanding as a minute to the treaty itself? Ambassador LINOWITZ. No, sir. I believe the feeling is that with this interpretation, which becomes part of the record, making clear to everyone that this is exactly what the language of the treaties is de |