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tween a treaty and an executive agreement somewhat in this fashion: A treaty is an agreement with a foreign country which is subject to the advice and consent of the Senate and an executive agreement is an agreement with a foreign country which is not subject to the advice and consent of the Senate. In effect, the Department of State asserts absolute authority to decide which agreements are executive agreements and which are treaties. Now, to me, it seems that an agreement to provide some $345 million in aid might be elevated to the status of a treaty when the $345 million directly figures in concurrent treaty negotiations of a plenary nature. But the Department of State, pursuant to Circular #135, has felt free simply to characterize the agreement as an executive agreement and thereafter to have done with the matter, dispensing with the advice and consent of the Senate. Perhaps you could state to the Committee your own definition of the difference between a treaty and an executive agreement.

Answer. Several factors are relevant to deciding whether a particular agreement should be a treaty or an executive agreement. As set forth in the regulations known as Circular 175, these factors are as follows:

"a. The extent to which the agreement involves commitments or risks affecting the nation as a whole;

"b. Whether the agreement is intended to affect State laws;

"c. Whether the agreement can be given effect without the enactment of subsequent legislation by the Congress;

"d. Past U.S. practice as to similar agreements;

"e. The preference of the Congress as to a particular type of agreement;

"f. The degree of formality desired for an agreement;

"g. The proposed duration of the agreement, the need for prompt conclusion of an agreement, and the desirability of concluding a routine or short-term agreement; and

"h. The general international practice as to similar agreements." Senator Sam Ervin's Subcommittee on the Separation of Powers of the Senate Judiciary Committee, after hearings in 1972 on this subject, wrote:

"American constitutional law recognizes, in the Constitution itself and in judicial opinion, three basic types of international agreement. First in order of importance is the treaty, an international bilateral or multilateral compact that requires consent by a two-thirds vote of the Senate prior to ratification. . . . Next is the Congressional-executive agreement, entered into pursuant to statute or to a preexisting treaty. Finally, there is the "pure" or "true" executive agreement, negotiated by the Executive entirely on his authority as a constituent department of government.

"It is the prerogative of the Executive to conduct international negotiations; within that power lies the lesser, albeit quite important, power to choose the instrument of international dialog."

(93d Con., 1st Sess., Congressional Oversight of Executive Agreements 6 (Comm. Print 1973)).

In the case of the Note Regarding Economic and Military Cooperation, the U.S. wished to assure that our rights under the Panama Canal Treaties would not be contingent upon implementation of the programs described therein. Accordingly, it was not in the U.S. interest to include these programs in the Treaty. The fact that we succeeded in our efforts to obtain Panama's agreement to this arrangement does not imply that the Administration does not intend to press for implementation of the program which we consider to be in the U.S. interest. What it does imply is that our legal rights with respect to the Panama Canal will not be condiționed in any way on the ultimate outcome of this independent undertaking.

Question 14 and 15. Many leading Constitutional authorities on executive agreements, such as Professor Raoul Berger, have disagreed with the position of the Department of State on this subject, but in any event this issue of treaty versus executive agreement is a basic issue of separation of powers between two branches of government and therefore does resolve itself into a question of what action each branch can take to protect its own prerogatives and powers. In that connection, are you familiar with Senate Resolution 24 introduced in this Congress by Senator Church and cosponsored, I might add, in the last Congress by then-Senator, now-Vice President Mondale?

Does the Department of State favor the passage of S. Res. 24?

Answer. The Administration has set forth its position with respect to the proposed S. Res. 24, in a letter to a report to the Chairman of the Senate Foreign Relations Committee dated December 30, 1977. We would be pleased to provide a copy to this Committee.

STATEMENT CONCERNING NOTE REGARDING ECONOMIC AND MILITARY

COOPERATION

At the hearing on November 15, the question was asked whether the Note Regarding Economic and Military Cooperation had been reported under the Case Act. The answer is that that Note has not been transmitted to the Congress under the Case Act because it is not a legally binding agreement.

QUESTIONS ADDRESSED TO RICHARD N. COOPER, UNDER SECRETARY OF STATE FOR ECONOMIC AFFAIRS

Question 1. Please describe briefly your present duties at the Department of State?

Answer. Under Secretary Cooper serves as the Under Secretary for Economic Affairs. He was appointed by the President by and with the consent of the Senate as stated in PL 92-353. His principal responsibilities consist in advising the Secretary of State on international economic affairs and in carrying out the Secretary's directives in this field. This activity consists in: giving broad supervision to the Department on economic policy issues; coordinating U.S. economic policy with other agencies, consultation and negotiation with representatives of foreign governments, and assuming specific responsibilities as directed by the Secretary of State.

Question 2. How long have you served in your present job?

Answer. Mr. Cooper was sworn into office as Under Secretary for Economic Affairs on April 8, 1977.

Question 3. Were you employed at the Department of State prior to your appointment as Under Secretary of State for Economic Affairs? If so, in what capacity?

Answer. From August, 1965 to August, 1966 Mr. Cooper was Deputy Assistant Secretary for Economic Affairs responsible for international monetary issues. From time to time, over the past several years, he has been a consultant to the Department, and from February 3 to April 8 he served in the Department as a Foreign Service Reserve Officer, Class-1.

Question 4. You participated in certain of the negotiations here in Washington with Minister Nicolas Ardito Barletta, Minister for Economic Planning and Development of the Republic of Panama. When were those meetings held, and how many were there?

Answer. Under Secretary Cooper participated in three meetings of discussions and negotiations with the Panamanian Minister, Mr. Nicolas Ardito Barletta on June 28, 1977, June 30, 1977 and July 13, 1977.

Question 5. Did you participate in any negotiations in Panama?

Answer. Under Secretary Cooper did not participate in negotiations in Panama. Question 6. At what point in time did you begin to be advised of the specific progress in the negotiations and specifically, when were you given information regarding the proposed loan package later discussed in direct negotiations between you and Minister Barletta?

Answer. Under Secretary Cooper followed the progress in Panama Canal negotiations only at a distance and in general until late June 1977, at which time he was requested by the Secretary to hold conversations with the Panamanians on certain economic issues. He subsequently participated in the meetings with the Panamanians listed in the answer to question 4.

Question 7. Who else attended these discussions on economic aid to Panama? Answer. These discussions included at various times Under Secretary Cooper, Ambassadors Bunker and Linowitz, Treasury Under Secretary Anthony Solomon, Treasury Deputy Assistant Secretary Arnold Nachmanoff, AID Assistant Administrator Ted Van Dyk, U.S. Executive Director to the World Bank, Edward Fried, U.S. Executive Director to the Inter-American Development Bank, Ralph Dungan, U.S. Executive Director to the International Monetary Fund, Sam Cross, Treaty Economic Affairs Advisor, Richard Camaur, Under Secretary Cooper's Assistant, Jessica Einhorn, and Peter Gosnell of the Eximbank.

Question 8. Please identify all representatives of the United States, whether or not directly employed by the United States, who, on July 16, 1977, discussed with any representative or official of the Republic of Panama any matter involving the financial aspects of the proposed Panama Canal treaties or the economic

aid commitment set forth in the executive agreement dated September 7, 1977, entitled "Note Regarding Economic and Military Cooperation." (Please consult records available to you at the Department of State to provide a full response in the event you do not have personal knowledge of the information sought.) Answer. A check of records at State, Treasury and Defense indicated that no meeting with Panamanian representatives was held on the date in question regarding economic arrangements.

Question 9. Please identify any private citizen of the United States who, purporting to act on behalf of the United States or appearing to act on behalf of the United States, discussed on July 16, 1977, with any representative or official of the Republic of Panama any matter involving the financial aspects of the proposed Panama Canal treaties or the economic aid commitment set forth in the executive agreement dated September 7, 1977, entitled “Note Regarding Economic and Military Cooperation.” (Please consult records available to you at the Department of State to provide a full response in the event you do not have personal knowledge of the information sought.)

Answer. The State Department has no information on any private United States citizen who had any discussions on July 16, 1967, with Minister Barletta regarding either the proposed treaties or the economic cooperation program. Question 10. Please identify all representatives of the United States, whether or not directly employed by the United States, who, discussed with any representatives or official of the Republic or Panama during the month of July, 1977, any matter involving the financial aspects of the proposed Panama Canal treaties or the economic aid commitment set forth in the executive agreement dated September 7, 1977, entitled "Note Regarding Economic and Military Cooperation." (Please consult records available to you at the Department of State to provide a full response in the event you do not have personal knowledge of the information sought.)

Answer. The following persons discussed with representatives of Panama economic arrangements in July 1977: Ambassador Ellsworth Bunker; Ambassador Sol Linowitz; Undersecretary Cooper; Treasury Undersecretary Anthony Solomon; Treasury Deputy Assistant Secretary Arnold Nachmanoff; Treaty Negotiator Richard R. Wyrough; Ambler Moss, Special Assistant to Ambassador Linowitz; Treaty Economic Affairs Adviser Richard Camaur; State Department Financial Economist Robert Taylor; and State Department Consultant Ely Brandes.

Question 11. Please identify any private c'tizen of the United States who, purporting to act on behalf of the United States or appearing to act on behalf of the United States, discussed with any representative or official of the Republic of Panama during the month of July, 1977, any matter involving the financial aspects of the proposed Panama Canal treaties or the economic aid commitment set forth in the executive agreement dated September 7, 1977, entitled "Note Regarding Economic and Military Cooperation". (Please consult records available to you at the Department of State to provide a full response in the event you do not have personal knowledge of the information sought.)

Answer. Dr. Ely Brandes, of 554 Madison Way, Palo Alto, California. He is President of International Research Associates and has been engaged as a consultant by the Panama Canal Company and the Department of State. During the negotiations, he was engaged by the Department as a consultant on the treaty's economic arrangements. Dr. Brandes also discussed financial aspects of the treaties with representatives of Panama.

Question 12. On February 24, 1959, the Department of State transmitted a note to the Embassy of Panama at Washington which contained a detailed report of the dispensing of $1,430,000 of the annuity for 1959 to various banks in New York with a balance of $500,000 of the annuity for that year being paid into the National Treasury of Panama. On December 12, 1962, with respect to the 1963 annuity payment, the Department of State advised the Ambassador of Panama that, in accordance with the instructions of the Government of Panama, the annual unhypothecated payment of $500,000, which until that time had continued to go to the Treasury of Panama, would cease to be paid to Panama and would be paid instead pursuant to the irrevocable authorization of Panama to the Chase Manhattan Bank. Certainly, one can understand that one reason Panama would wish an increase in its annuity payment is that Panama apparently never sees

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the money-the money, in effect, being paid pursuant to irrevocable authorization direct to various New York banks.

Please explain in detail the present practice regarding these annuities; are the annuity monies paid direct to New York banks pursuant to irrevocable authorizations or do they go into the Treasury of the Republic of Panama?

Answer. Yes, a total of $1,930,000 of the annual $2.3 million payments under the current treaties is made directly to three New York banks, as fiscal agents for the Republic of Panama, in accordance with irrevocable instructions issued by the Government of Panama to the Department of State.

It should be noted, however, that the New York banks who receive these payments are not the parties in interest in these transactions. Rather, they are employed by the Government of Panama as fiscal agents to administer three separate issues of Panama Government bonds. Two of these issues are traded publicly on the U.S. market, and a third is held by the Prudential Corporation. The banks of course receive a fee for their services as fiscal agents, but they have not assumed any liability to the bond-holders.

We have no reason to believe that these agents had anything to do with Panama's desire to receive an increased compensation from the canal. These arrangements do indicate that Panama has applied the money it has received from past Treasury payments for responsible purposes-assuring repayment to holders of its bonds.

Question 13. Bearing in mind that the Library of Congress reports the external debt of Panama to be some $2.77 billion and the external public debt to be $1.7 billion, do you foresee the hypothecation of increased annuity payments or rents which would come due under the terms of the proposed treaties? In other words, do you believe that the money which would flow from Canal operations which, under the proposed treaties, is guaranteed to Panama would be pledged to cover existing indebtedness or would it be pledged to cover increased indebtedness? Answer. The World Bank's estimate of Panama's total disbursed public debt is $1.1 billion as of year end 1976. We do not know whether Panama will use annuity payments under the new treaty as a means of covering existing indebtedness or to finance new indebtedness.

Question 14. Please state further in detail any arrangement known to you, or reported in the records of the Department of State, which the Republic of Panama has made or proposed to make with any bank or international financial institution respecting the repayment of existing loans from funds thought to be forthcoming under the financial arrangements set forth in the proposed Panama Canal treaties or in the Note Regarding Economic and Military Cooperation.

Answer. With regard to the loans secured by annuities provided for in the present treaty, we understand that discussions will be held between representatives of the bondholders and fiscal agents and Panamanian officials to work out appropriate technical adjustments in existing arrangements in order to continue the security for those loans after new treaties are ratified. The United States Government has acted as a facilitator in this matter, but will not be directly involved in those discussions. We are not aware of any other discussions between the Government of Panama and any lending institution specifically regarding the use of funds to be derived by Panama under the new treaty arrangements or the programs described in the note.

Question 15. Please state further in detail any arrangement known to you, or reported in the records of the Department of State, which the Republic of Panama has made or proposes to make with any bank or international financial institution respecting the extension of additional loans or credits to Panama. Answer. Besides the proposals contained in the September 7 note regarding U.S. bilateral economic and military assistance, we understand Panama has submitted loan proposals to the Inter-American Development Bank (IDB) for various pre-investment studies, for agricultural development, and for rural electrification, totalling about $20 million. Loan proposals have also been submitted to the World Bank for support for road maintenance and agricultural credit projects which could total up to $23 million. There may be other loan proposals particularly with commercial banks, of which we are unaware.

Question 16. Please provide to the Committee any information you have, or which is available in the records of the Department of State, regarding the exposure of United States banks or their foreign branches in the Republic of Panama.

Answer. We have nothing to add to the information on this subject provided to Senator Proxmire by the Chairman of the Federal Reserve System and the Comptroller of the Currency which can be found in the Congressional Record for October 25, 1977 on pages S17730 and $17731.

Question 17. Do you agree with Minister Barletta's assessment of the cash flow value of the Panama Canal Treaty as some $2,262 billion over its 23-year term for an annual average of about $100 million? If not, please state the basis for your disagreement with this analysis.

Answer. As you know the major part of the annuity payment to Panama is pegged to the flow of Canal traffic and is subject to adjustment on the basis of price changes. Therefore, since a substantial part of the payments is subject to these variables we cannot predict that any specific amount will be the totality of annuity payments to Panama during the life of the treaty. Our own estimates are on the order of $50-60 million per year for the first years but it is possible that total annuity payments could reach $2 billion, over the life of the treaty, depending on the assumptions made concerning the aforementioned variables. Question 18. These revenues, in any event, are going to be a substantial increase over the present annuity of $2,328,000. So it would certainly be helpful to the Committee to know what percentage of these increased revenues would return to the United States in the form of payments to New York banks on outstanding indebtedness. Do you have any estimate of the percentage of these increased revenues which would be applied annually against debts to the large international banks or to the large commercial banks located primarily in New York?

Answer. The new treaty annuity payment would increase net Panamanian Government revenue by at least $50 to $60 million per year. We are not in a position to speculate on how such revenue might be applied by Panama to existing indebtedness.

Question 19. Your prepared statement and your response to previous questions have been very helpful, but the Committee needs more detailed information regarding the loans promised by this proposed executive agreement entitled "Note Regarding Economic and Military Cooperation." The agreement provides for $200 million in Export-Import Bank loans. What percentage of United States exports go annually to Panama-excluding, obviously, bank loans?

Answer. In CY 1976 the United States exported $354,173,392 of merchandise to Panama, and $113,232,144,778 to the entire world, including Panama. Thus, exports to Panama made up 0.313% of our total exports for that year. The figure for Panama does not include the Canal Zone, which is treated as a separate foreign entity in the United States statistics.

Question 20. How does the percentage of United States exports to Panama compare with the 1.37% exposure of the Ex-Im Bank in Panama which would result from the proposed $200 million in loans to Panama? How does the ratio of that percentage to exposure compare with similar ratios applicable to other countries?

Answer. Based on conversations with the Export Import Bank, we understand the Bank's possible participation in financing of up to $200 million dollars over ten years might be considered unusual if Panama were viewed simply as a small developing country. But the bank's possible participation up to $200 million is not considered unusual in view of the present size of the Panamanian economy and the improved investment climate which is expected to result from the treaties. Thus, large capital investment projects which may well develop over the next five years in Panama for which United States firms will provide goods and services. The bank does not stimulate these projects but reacts to the initiative of others. Thus the $200 million amount is based on an estimate of business which may come to U.S. suppliers and involve the bank from ongoing exports to Panama, and major capital investments for such projects, among others, as copper development and port improvement. If you would like greater detail on this matter the Bank would be pleased to respond to any direct queries.

Question 21. Who would be the principal borrowers in Panama of the Ex-Im Bank loan money? Would they be government corporations or would they be private importers? If private importers, which firms would be the principal firms to benefit? Identify the principal stockholders or owners of each.

Answer. To date, no Ex-Im Bank projects contemplated under the September 7 note have been prepared or approved. By way if illustration, past Ex-Im Bank projects abroad have included financing of both private and public enterprises, such as utilities, port expansion, industrial plants, and power, transportation and communications facilities.

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