Memorandum for the Secretary of Defense
Regarding: Panama-American Relations
I understand that your representative, Under Secretary of the Army Johnson, is sitting in with the State Department representatives to discuss certain points of friction between the governments in the Panama Canal Zone.1 President Remón personally presented some of his specific complaints to me.2 I give you a few from memory:
(a). Without the consent of the Panama Government, the whole Panama operation was reorganized something like two years ago, setting up the Canal as a corporation, solely owned by the United States Government. Apparently the purpose of this reorganization was to make the operation largely free of control from Washington and of the normal processes of government.3
My own reaction to this complaint is that, assuming the alleged change was perfectly legal and proper under the Treaty, there was still a rather arbitrary attitude displayed and, in any event, no kind of organization can relieve the Administration of complete responsibility for the action of its agents.4 Consequently, the Panama Canal must be directed and run in such a way as to be in keeping with the integrity, dignity and reputation of this government.
(b). The Panama Canal has certain special privileges, recognized by Treaty. In general, these privileges make certain that American employees in the Canal Zone will be treated as well as American employees in any other place. However, the complaint is made that these privileges are consistently and flagrantly abused. It is claimed, for example, that the Panama Canal, operating as a corporation, sells supplies to ships passing through the Canal. This, the Panamanians believe, is not only a direct violation of the spirit of the Treaty, but is the cause of very great resentment on the part of the normal citizen.
It is claimed that personnel within the Canal Zone take advantage of their commissary and post exchange privileges, and conduct black market operations outside the Zone.
It is further claimed that people within the Zone make imports from all over the world of items that come in completely duty free. Thus these items entering the region escape the normal tariff tolls of Panama and of the United States as well. This practice, it is alleged, further encourages black marketing, and robs Panama of tariff revenues and of trade that might otherwise come to that country.
(c). It is maintained that if a Panamanian is employed by the Zone, then Panama has no right whatsoever to tax the individual. This applies even though the individual lives outside the Zone, sends his children to Panama schools, and participates in the advantages deriving from public expenditures of many kinds.
All these are merely illustrative.
I promised the Panama President that we would take up every single complaint and try jointly to decide each on its merits. I promised that we would try to apply our sense of logic and of justice to the whole problem.
In the presence of the Secretary of State, I specifically stated that we would not entertain the thought of revising the basic Treaty, but that if we found that abuses had grown up and persisted in the Zone, that we would take the necessary steps to correct them, even if this process should call for the drawing up of a new Treaty dealing with these particular points.5
I do not know whether Mr. Johnson is participating in negotiations as your representative or as a representative of the Secretary of the Army. In any event, I believe he should be informed that it is the purpose of this Administration to be fair and just in working out solutions to these several problems.
I am sending a copy of this memorandum to the Secretary of State so that if there is any substantial error in it--either of commission or of omission--he can so indicate to you, and to me.6
