them have branches in Panama and should have been able to discover that the interest alone on Panama's debts take 38 percent of Panama's income. Perhaps these banks relied on the unauthorized and neverratified Kissinger-Tack agreement signed February 7, 1974, which talked of ceding all the U.S. territory in the Canal Zone to Panama. The directors of these giant banks are a "Who's Who" of American business and finance. Could that explain why two of our country's best known public relations men, F. Clifton White, who worked for Senator Goldwater in his 1964 campaign for the Presidency, and Joseph Neopolitan, who worked for Vice President Humphrey's campaign for the Presidency in 1968, were hired for $200,000 to sell the surrender of our Panama Canal?

Twelve. Some of these same giant banks were criticized for very large loans to Bert Lance and for selling to unwary buyers their New York City bonds of questionable value.

It is certainly hoped that these 10 leading American banks are not directly or indirectly involved in the high-powered campaign, extending from the White House to a movie star in California, to persuade American taxpayers to approve the surrender of the greatest single construction and investment our country ever made, our canal and the American Zone in Panama.

Another surrender, after the abandonment of our friends in Cuba, at the Bay of Pigs, of Southeast Asia, of Angola and Mozambique, and our Monroe Doctrine, might be construed as the twilight of the great American Republic, which built the canal for less than all the time and cost predictions.

Thank you, sir.

The CHAIRMAN. Thank you, Mr. Schlafly.

Are there questions?

Senator PERCY. Yes, Mr. Chairman. I have a few.

The CHAIRMAN. I hope we will hold this to a minimum because time is short.

EMERGENCY TASK FORCE ON PANAMA CANAL

Senator PERCY. Mr. Schlafly, I wonder if you would tell us something about the emergency task force on the Panama Canal of the American Council for World Freedom. What is the size of its membership? How long has it been in existence?

Mr. SCHLAFLY. It has been in existence for about a year. Its members include Adm. John MeCain, who is retired and served as Commander in Chief, Pacific, during the Vietnam war; Gen. Daniel Graham, who served as Director of the Defense Intelligence Agency until, I think, about a year ago, and he is retired now; Father Raymond de Jaegher: Dr. Lev Dobriansky, who is head of a department at Georgetown University; Dr. Stefan Possony, who is with the Hoover Institute at Stanford University; and others, such as Paul Bethel, who served in the American Embassy-the last American Embassy-in Cuba.

Senator PERCY. What is the total membership, then?

Mr. SCHLAFLY. Of the members of this committee-my guess is it would be about a dozen.

Senator PERCY. I see. I received a fundraising letter, a solicitation from an organization called: "The Panama Canal Defense Fund of the Council for Inter-American Security."

I know that you have also sent out a letter requesting funds. Is there any coordination between your group and this other group?

COST TO U.S. TAXPAYERS CLARIFICATION

Mr. SCHLAFLY. Not that I know of directly, although I might ask if anyone else here knows of that. But I don't know of any direct

connection.

Senator PERCY. You have stated that these treaties will cost the taxpayers dearly. At the outset of the most recent negotiations on the treaties, I made it clear that I would not approve of payments to Panama from Federal appropriations, and that any payments we made to Panama should come from the toll revenues of the canal. As far as I know, the new treaty does provide that payments to Panama must come from toll revenues, and that no U.S. Government appropriations are involved.

So, when you say that the treaties will cost the taxpayers dearly. in what way are you saying it will cost them? You don't mean in appropriated funds, do you?

Mr. SCHLAFLY. No; unless it was as Mr. Williams testified here. There was some question about the payment of their charges.

But it would cost our Navy if for any reason it was denied the right to use the canal, because it would have to make the long trip around South America. Of course, that would be true of our other shipping. too. Most of the shipping that goes through the canal is from or to American ports, and if for any reason Panama decided to close the canal, or if it nationalized it, then we would have to take the long trip around Cape Horn, which takes 30 days and which costs some 10 or 12 times the toll charges.

Senator PERCY. Mr. Chairman, do I have time for just one more question? I know that you are anxious to move ahead. The CHAIRMAN. Go ahead.

PROPOSED ECONOMIC ASSISTANCE FOR PANAMA

Senator PERCY. Mr. Schlafly, you talk about an anticipated economic assistance package for Panama. You call this a financial burden to the U.S. taxpayers.

Do you support the payments that we make to Spain, to other countries where we have military bases, Mr. Schlafly? In other words. our Department of Defense feels it is essential that we maintain overseas bases, and we generally make direct payments for those. They are not on our territory, obviously, and so we do make payments. Do you support those payments?

Mr. SCHLAFLY. Yes; I do. And I think the Senate is wise in approving them.

Senator PERCY. How do you differentiate, then, between payments to Panama-in the form of loans, credits, sales, and guarantees-to protect our interests there?

Mr. SCHLAFLY. I respectfully submit that there is an important difference.

Those are our bases and and on our land. The Panama Canal Zone is clearly American land. The bases there cost us nothing. By this treaty we are not only giving Panama the canal, but we are paying Panama to take the canal away from us. I think that is the big difference.

Senator PERCY. Thank you very much, indeed, for your appearance here today.

The CHAIRMAN. Senator Griffin.

MEETING OUR OBLIGATIONS TO PANAMA

Senator GRIFFIN. Mr. Chairman, I don't want to argue with my friend from Illinois, but I will call attention to the fact that even though an individual Senator may declare that he is not going to vote for an appropriation, there isn't anything in this treaty that says that our obligations will not be met with appropriations, if necessary. In other words, the treaty obligates us to certain things. Mr. SCHLAFLY. I agree with you.

Senator GRIFFIN. It is assumed by a lot of people that our obligations will be met out of revenues received from tolls. The question I raised with the labor leaders earlier is what happens if the tolls don't cover the obligation?

There is a serious question now whether the tolls will cover the obligations. It is generally agreed that some increase in the tolls is going to be necessary. We got into a discussion with the present Governor of the Canal Zone, General Parfitt, as to how much the tolls could be increased without the counterproductive result of having the traffic in the canal go down. The estimate was 25 percent to 30 percent. I would point out that surely one of the biggest obligations is going to be the payment of wages, to which the United States is committed under this treaty. We are committing ourselves that labor conditions and rates of pay will not be less in the future than they are today. But there is no ceiling on what they can be in the future.

In other words, the United States will be committed to pay whatever wage arrangements are negotiated between the Canal Commission, to be established in the future under the treaty, and the labor unions, and will presumably have to pay those wages.

If the tolls are not enough, how do we pay them?

Mr. SCHLAFLY. I am afraid the American taxpayers will have to pay it because in this treaty we have given Panama the right to take large sums from the canal income which, of course, are not payable now.

Senator GRIFFIN. I am not saying that we shouldn't. I just think that we ought to know what we are doing. We are committing ourselves to appropriate funds if necessary. That is how I read the treaty. I don't see that there is any other practical result.

Mr. SCHLAFLY. That is because the income from the canal will not be enough, in my opinion, to pay the commitments we have made to Panama, excluding the wages, and the canal has not been operating at a profit in the last year or two.

Senator GRIFFIN. Under the present laws, with the United States exercising rights, "as if sovereign" in the Canal Zone, considered to

be U.S. property, et cetera, it is clear under our laws today that the employees there would not have the right to strike. I don't know what the situation will be after we ratify the treaty, or how much pressure they can bring.

We have already seen that early option retirement will be very generous. What other very generous terms of employment they can negotiate in the future we can only speculate on at the present time. But, whatever they are, the United States is committed under the treaty to pay them.

Mr. SCHLAFLY. That is correct.

I frankly think that the treaty represents a new burden on the American taxpayers.

Senator PERCY. Senator Griffin, I think you brought up a good point. I think you and I could work on this particular feature. I assume, projecting ahead, that at no time would the revenue promised to Panama ever exceed the revenue that comes in from tolls.

There is no reason that we could not try to work out some language that would make clear that there is a limit, that if the minimum payment requirement is not met by the toll revenue, that we would not be obligated to make further payments. I don't think we should guarantee future revenue.

Senator GRIFFIN. Well, I would think that would take a renegotiation of the terms of the treaty because you would be changing the terms of the treaty, or so it seems to me.

Mr. SCHLAFLY. I fully agree with Senator Griffin. I thank you gentlemen for the privilege of appearing before this distinguished committee.

The CHAIRMAN. Thank you very much.

Our next witness will be Mr. Gary L. Jarmin, Legislative Director of the American Conservative Union, Washington, D.C.

Mr. Jarmin, we have your statement. I hope you will be as brief as possible.

Mr. JARMIN. I will try to summarize my statement in the interest of time.

The CHAIRMAN. It will be printed in the record in full. [Additional questions and answers follow:]

RESPONSE TO ADDITIONAL QUESTIONS FOR THE RECORD

Question 1. In your testimony you have relied upon the case Wilson v. Shaw, but are you aware of the case Canal Zone v. Coulson decided the year after Wilson v Shaw which said that the Constitution was not applicable in the Canal Zone and in speaking of Wilson v. Shaw stated "We . . . are of the opinion that the Supreme Court did not hold more in that case than that the United States had the use, occupation and control in perpetuity of the Canal Zone."?

Answer. The case you cited of Canal Zone v. Coulson was a writ of error to review a conviction of murder in the Canal Zone. The only order entered by the Supreme Court was "Writ of error dismissed for want of jurisdiction." This was on November 9, 1908. See 212 U.S. 553, 54 L.Ed. 650. This Supreme Court decision does not discuss Wilson v. Shaw, 204 U.S. 24, and there is no Supreme Court Decision criticizing or restricting Wilson v. Shaw. Wilson v. Shaw has been cited with approval by the Supreme Court many times, the latest being in 1968 in the case of Flast v. Cohen 392 U.S. 83 at 91. 20 L.Ed.2d 947 at 956. Since the Coulson case was only a Canal Zone decision in a case not involving Canal Zone title, anything the Court may have said about Wilson v. Shaw would be dicta and could not possibly overrule or affect the Supreme Court's holding in 1907 in Wilson v. Shaw.

Question 2. You also mentioned the case of U.S. v. Husband R. (Roach) which in addition to its statement about unincorporated territory upheld previous rulings that the Constitution was not the supreme law of the Canal Zone? Why, if the United States has full sovereignty over the Canal Zone, is the Constitution not applicable?

Answer. In Downes v. Bidwell, 182 U.S. 244 (1901), and in U.S. v. Husband Roach, 453 F.2d 1054 (1971), the Supreme Court and the Court of Appeals respectively held that the Constitution did not apply to the U.S. territories of Puerto Rico and the Canal Zone. The Constitution applies to states, not territories. However, the fact that a territory has not yet been admitted into our Union as a state does not lessen the title and sovereignty of the United States over the territory. We can find no court decisions holding that the United States did not have full title and sovereignty over the lands in the Louisiana Purchase, Alaska, and Hawaii from the time of purchase and long before given statehood. The same is true of our Canal Zone.

Question 3. On page 5 of your statement you said that supporters of the Treaty allege that the United States could recapture the Canal Zone if the Treaty were violated. However, has not the real meaning of the statements by supporters been that the United States could take action to maintain the neutrality of the Canal and not recapture the Canal Zone?

Answer. You assert that under the new treaty the United States "could take action to maintain the neutrality of the Canal" rather than recapture the Canal Zone. It seems to me this is a distinction without a difference. If Panama closed the Canal, or nationalized it, as Nasser did the Suez Canal, or invited the Cubans or Russians to operate it, then bloody action by our Marines and Navy would be required to reopen the Canal because we would no longer own a Canal Zone from which to launch our offensive. Clearly, the Canal is much easier to defend than Panama, if the United States owns and controls the Canal Zone, than if the Zone is owned and controlled by Panama, backed up by Russia or Cuba or both. Our nearest base would be many miles away.

Question 4. In the event of an attack upon the Canal from outside Panama, would not any effort to defend the Canal, if it were to be successful, depend upon the combined forces of the United States and not the relatively small forces in the Panama Canal Zone? Is not the real test of our ability to defend the Canal and prevent its use by enemy ships based on the control of access to the Canal? Answer. Your question assumes that the only threat to the Canal would come from outside Panama. The threat to British and French use of their Suez Canal came from Egypt. The threat to our use of the Canal we built could just as easily come from Panama, perhaps backed by Cuba or Russia. Protecting our right to use the Canal from Florida or Texas is far more difficult and expensive in lives and money than defending existing bases located alongside the Panama Canal. During the four years of World War II the great German and Japanese military powers were unable to sabotage the Canal or overthrow the forces we had there. Anybody who was in the Canal Zone during World War II knows that defense of the Canal was not based on "access to the Canal," that is on bringing troops in from Florida or Texas. No, it was based on the troops and planes actually based on the Canal Zone and the many islands protecting the Canal Zone. It would be a serious weakening of our defense of the Canal Zone if this defense is not based on weapons and soldiers in the Canal Zone but on the possibility of bringing such weapons and soldiers to the Canal Zone from far away.

STATEMENT OF GARY L. JARMIN, LEGISLATIVE DIRECTOR, AMERICAN CONSERVATIVE UNION, WASHINGTON, D.C.

Mr. JARMIN. The American Conservative Union [ACU] has been one of the leading organizations fighting against these treaties. Our organization of 100.000 members and 40 State chapters organized a Panama Canal task force headed by the distinguished senior Senator from South Carolina, Strom Thurmond. To date we have spent close to one-half million dollars on this campaign to educate the American public and the Senate, the Congress, about what we feel is at stake.

99-213 O 78 - 31