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PANAMA CANAL TREATY IMPLEMENTING LEGISLATION
HEARINGS
BEFORE THE
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
NINETY-SIXTH CONGRESS FIRST SESSION
ON
S. 1024
TO IMPLEMENT THE PANAMA CANAL TREATY OF 1977 AND
RELATED AGREEMENTS, AND FOR OTHER PURPOSES
JUNE 26-27, 1979
Printed for the use of the Committee on Armed Services
U.S. GOVERNMENT PRINTING OFFICE
48-38660 WASHINGTON : 1979
COMMITTEE ON ARMED SERVICES
JOHN C. STENNIS, Mississippi, Chairman HENRY M. JACKSON, Washington JOHN TOWER, Texas HOWARD W. CANNON, Nevada STROM THURMOND, South Carolina HARRY F. BYRD, JR., Virginia BARRY GOLDWATER, Arizona SAM NUNN, Georgia JOHN W. WARNER, Virginia JOHN C. CULVER, Iowa GORDON J. HUMPHREY, New Hampshire GARY HART, Colorado WILLIAM S. COHEN, Maine ROBERT MORGAN, North Carolina ROGER W. JEPSEN, Iowa J. JAMES EXON, Nebraska
CARL LEVIN, Michigan
FRANCIS J. SULLIVAN, Staff Director JOHN T. TiCER, Chief Clerk
(Ii)
CONTENTS
CHRONOLOGICAL LIST OF WITNESSES
JUNE 26, 1979
Duncan, Hon. Charles W., Jr., Deputy Secretary of Defense; accompanied by Gen. Welborn Dolvin, Department of Defense Treaty Representa- Page tive---70
Christopher, Hon. Warren M., Deputy Secretary of State; accompanied by Hon. David H. Popper, Special Representative of the Secretary of State for Panama Treaty Affairs--92 Blumenfeld, Hon. Michael, Assistant Secretary of the Army for Civil
Works_ 107 Parfitt, Harold R., Governor of the Canal Zone and president of the
Panama Canal Company--168 McAuliffe, Gen. Dennis P., commander in chief, U.S. Southern Command_ --196
JUNE 27, 1979
Bauman, Hon. Robert E., a Representative in Congress from the State of
Maryland- -233 Hansen, Hon. George, a Representative in Congress from the Second
Congressional District of the State of Idaho--244 Hubbard, Hon. Carroll, a Representative in Congress from the First
Congressional District of the State of Kentucky--253 Campbell, Alan K., Director, Office of Personnel Management ----------283
Parfitt, Maj. Gen. H. R., Governor of the Canal Zone 297 Percy, Hon. Charles H., a U.S. Senator from the State of Illinois-------- 306
Gravel, Hon. Mike, a U.S. Senator from the State of Alaska------------ 316
Kujawa, Leonard J., Arthur Andersen & Co- 354 Long, Hon. Russell B., a U.S. Senator from the State of Louisiana ------ 402 Fasick, J. Kenneth, Director, International Division, General Accounting
Office, accompanied by Frank Zappacosta, Assistant Director, Accounting and Financial Reviews; and Henry Avalos, team leader----------- 404
Meiklejohn, Kenneth, legislative representative, American Federation of
Labor and Congress of Industrial Organizations 420 Haar, Col. Herbert R., Jr., associate port director, Port of New Orleans,
U.S. Army Corps of Engineers, retired, accompanied by Richard A.
Lidinsky, Jr., director of transportation, Port of Baltimore----------- 457
Geyelin, Henry R., president, Council of the Americas, accompanied by
Otto Reich, director, Washington operations of Council of the Americas- 490 Benkert, Rear Adm. William M., (Retired), U.S. Coast Guard, president,
American Institute of Merchant Shipping- ----------496
(III)
PANAMA CANAL TREATY IMPLEMENTING LEGISLATION
TUESDAY, JUNE 26, 1979
U.S. SENATE,
COMMITTEE ON ARnmEi SERVICES,
Washington, D.C.
The committee met pursuant to notice, at 9:05 a.m., in room 1318 Dirksen Senate Office Building, Hon. John C. Stennis (chairman) presiding.
Present: Senators Stennis, Cannon, Byrd of Virgina, Exon, Levin, Goldwater, Warner, Humphrey, Cohen, and Jepsen.
Staff present: Francis J. Sullivan, staff director; John C. Roberts, general counsel; Phyllis A. Bacon, assistant chief clerk; Edward B. Kenney, professional staff member; Christine E. Cowart, research assistant; Doris E. Connor and Mary A. Shields, clerical assistants. Also present: Frank Krebs, assistant to Senator Cannon; Jeffrey Record, assistant to Senator Nunn; Gerald Stacy, assistant to Senator Culver; Greg Pallas, assistant to Senator Exon; Peter Lennon, assistant to Senator Levin; Christopher Lehman, assistant to Senator Warner; David Fitzgerald, assistant to Senator Humphrey; Michael Hastings, assistant to Senator Cohen; and Mike Donley, assistant to Senator Jepsen.
[The bill, S. 1024 follows:]
(1)
2
96THCONGRESSS
1ST SESSION S
To implement the Panama Canal Treaty of 1977 and related agreements, and for other purposes.
IN THE SENATE OF THE UNITED STATES
APRIL 26 (legislative day, APRIL 9), 1979
Mr. STENNIS (by request) introduced the following bill; which was read twice and
referred to the Committee on Armed Services
A BILL
To implement the Panama Canal Treaty of 1977 and related
agreements, and for other purposes.
1 Be it enacted by the Senate and House of Representa2 ties of the United States of America in Congress assembled,
3 That this Act may be cited as the "Panama Canal Treaty of 4 1977 and Related Agreements Implementation Act of
5 1979".
TABLE OF CONTENTS See. 2. Statement of purpose.
Seec. 3. IDefinitions and general provisions.
TITLE I-PANAMANIAN RELATIONS AND SECURITY MATTERS
Sec. 101. UTnited States-Panama joint committees.
2
Sec. 102. Authority of the Ambassador. Sec. 103. Security legislation. Sec. 104. Arms export control. See. 105. lPrivileges and immunities. Sec. 106. Termination of Canal Zone Government; transfer of records. See. 107. Payment to Panama; repealer.
TITLE 11-PANAMA CANAL COMMISSION
PART 1 -ORGANIZATIONAL MATTERS
Sec. 201. Establishment; purposes; location of offices. Sec. 202. Payment of interest to United States Treasury; repeal of requirement. Sec. 203. Expenditures and payments to Panama. Sec. 204. Public service payments to Panama. Sec. 205. Board of directors of commission. Sec. 206. Quorum of board of directors. Sec. 207. Administrator and deputy. Sec. 208. Suits against commission. Sec. 209. Applicability of Government Corporation Control Act. Sec. 210. Commission property and assets; depreciation and amortization. Sec. 211. Regulations regarding navigation, passage, and pilotage. Sec. 212. Funds and accounts; furnishing of services; reimbursement. Sec. 213. Public property and procurement; transfers and cross servicing.
PART 2-TOLLS
Sec. 230. Measurement rules; changes in rates. Sec. 231. Setting of rates under new treaty. Sec. 232. Bases of tolls.
PART 3-CLAIMS
Sec. 260. Measure of damages; time for filing; board of local inspectors.
PART 4-SEA LEVEL CANAL STUDY
Sec. 270. United States-Panama joint committee; study.
TITLE III-EMPLOYEES AND POSTAL MATTERS
PART 1-EMPLOYMENT SYSTEM
Sec. 301. Repealers and changes in Canal Zone Code. Sec. 302. Definitions.
Sec. 303. Panama Canal employment system. Sec. 304. Continuation of Canal Zone merit system. Sec. 305. Overseas recruitment and retention. Sec. 306. Transfer of Federal employees to commission. Sec. 307. Merit and other employment requirements. Sec. 308. Regulations; examining office. Sec. 309. Compensation of military, naval, or Public Health Service personnel
serving commission.
4
3
See. 310. Applicability to Smithsonian Institution.
PART 2-CONDITIONS OF EMPLOYMENT, PLACEMENT, AND RETIREMENT
Sec. 321. Transferred employees.
Sec. 322. Placement.
See. 323. Educational travel benefits.
Sec. 324. Adjustment of compensation for loss of benefits.
Sec. 325. Early retirement eligibility.
Sec. 326. Early retirement computation.
Sec. 327. Employees of related organizations.
Sec. 328. Applicability of benefits to noncitizens.
Sec. 329. Non-United States citizen retirement.
Sec. 330. Technical amendments.
PART 3-POSTAL MATTERS
Sec. 341. Postal service.
TITLE IV-COURTS AND RELATED FUNCTIONS
Sec. 401. Continuation of code and other laws.
Sec. 402. Jurisdiction during transition period.
Sec. 403. Divisions and terms of district court.
Sec. 404. Term of certain offices.
Sec. 405. Residence requirements.
Sec. 406. Special district judge.
Sec. 407. Magistrates' courts.
Sec. 408. Oath.
Sec. 409. Transition authority.
Sec. 410. Special immigrants.
Sec. 411. Prisons; parole; pardon.
TITLE V-MISCELLANEOUS PROVISIONS
Sec. 501. Health director; hospitals.
Sec. 502. Disinterment, transportation, and reinterment of remains.
Sec. 503. Effective date.
STATEMENT OF PURPOSE
2 SEC. 2. It is the purpose of this Act to provide legisla3 tion necessary or desirable for the implementation of the
4 Panama Canal Treaty of 1977 between the United States of
5 America and the Republic of Panama and of the related
6 agreements accompanying that treaty.
5
4
DEFINITIONS AND GENERAL PROVISIONS
2 SEC. 3. (a) As used in this Act, references to the 3 Panama Canal Treaty of 1977 and related agreements mean 4 the Panama Canal Treaty between the United States of 5 America and the Republic of Panama signed September 7, 6 1977, the agreements relating to and implementing that 7 Treaty signed on the same date, and any agreement conclud8 ed pursuant to the Exchange of Notes relating to Air Traffic
9 Control Services signed September 7, 1977. 10 (b) The Canal Zone Code is hereby redesignated, and 11 hereinafter in this Act referred to as, the Panama Canal 12 Code.
13 (c) Except as otherwise provided in, or where inconsist14 ent with, the provisions of this Act, the following words and 15 phrases are amended as follows wherever they appear in the 16 Panama Canal Code and other laws of the United Std.tes, 17 unless in context the changes are clearly not intended, or 18 unless such words and phrases refer to a time prior to the 19 effective date of this Act, as defined in section 503 (herein20 after in this Act called the "effective date"): 21 (1) "Panama Canal Company" to read "Panama 22 Canal Commission"
23 (2) "Company" to read "Commission" wherever 24 the word "Company", has reference to the Panama 25 Canal Company.
6
5
S(3) "Canal Zone Government" to read "Panama
2 Canal Commission
3 (4) "Governor" or "Governor of the Canal Zone" 4 to read "Panama Canal Commission" wherever the
5 reference is to the Governor of the Canal Zone.
6 (5) "President" to read "Administrator" wherever 7 the word "President" has reference to the president of
8 the Panama Canal Company.
9 (6) "Government of the Canal Zone", or "Gov10 ernment", wherever the reference is to the Govern11 ment of the Canal Zone, to read "United States of 12 America".
13 (7) "Canal Zone waters" and "waters of the 14 Canal Zone" to read "Panama Canal waters" and 15 "waters of the Panama Canal", respectively. 16 (8) "Canal Zone Merit System" to read "Panama 17 Canal Employment System". 18 (9) "Canal Zone Board of Appeals" to read 19 "Panama Canal Board of Appeals". 20 (d) Reference to the Canal Zone in provisions of the 21 Panama Canal Code or other laws of the United States 22 which apply to transactions, occurrences, or status after 23 (treaty effective date) shall be deemed to be to areas and 24 installations in the Republic of Panama made available to the
7
6
1 United States pursuant to the Panama Canal Treaty of 1977
2 and related agreements.
3 (e) The President shall, within two years after the 4 Panama Canal Treaty of 1977 enters into force, submit to
5 the Congress proposed legislation which would6 (1) amend or repeal provisions of law which in 7 their present form are applicable only during the tran8 sition period prescribed in Article XI of that Treaty,
9 and
10 (2) incorporate the remaining provisions of the 11 Panama Canal Code into the United States Code, pro12 posing any changes thereto considered advisable in 13 light of the experience as of that time under that 14 Treaty.
15 TITLE I-PANAMANIAN RELATIONS AND 16 SECURITY MATTERS 17 UNITED STATES-PANAMA JOINT COMMITTEES 18 SEC. 101. (a) The President shall appoint the repre19 sentatives of the United States to the Joint Commission on 20 the Environment to be established under paragraph 2 of Arti21 cle VI of the Panama Canal Treaty of 1977. 22 (b) The President shall designate and the Secretary of 23 State shall coordinate the participation of the representatives 24 of the U~nited States to the Consultative Committee between 25 the United States and the Republic of Panama to be estab-
8
7
1 lished under paragraph 7 of Article III of the Panama Canal
2 Treaty of 1977.
3 AUTHORITY OF THE AMBASSADOR
4 SEc. 102. (a) The Ambassador to the Republic of 5 Panama shall have full responsibility for the coordination of 6 the transfer to the Republic of Panama of those functions 7 that are to be assumed by the Republic of Panama pursuant 8 to the Panama Canal Treaty of 1977 and related agree9 ments.
10 (b) The Administrator of the Panama Canal Commission 11 and personnel under his supervision shall not be subject to 12 the direction or supervision of the United States Chief of Mis13 sion in the Republic of Panama with respect to the responsi14 bilities of the Commission for the operation, management, or 15 maintenance of the Panama Canal as established in this or 16 other Acts, and the Panama Canal Treaty of 1977 and its 17 related agreements; in other respects (22 U.S.C. 2680a) shall 18 be applicable.
19 SECURITY LEGISLATION 20 SEC. 103. (a) Sections 34 and 35 of title 2 of the 21 Panama Canal Code are repealed. 22 (b) Section 1 of title II of the Act of June 15, 1917 (50 23 U.S.C. 191), is amended by (1) striking the second paragraph 24 :of that section, and by (2) striking the te rnm the Caria l 25 Zone,".
9
8
1 (c) Section 2 of the Act of November 15, 1941 (50
2 U.S.C. 191b) is repealed.
3 (d) Section 1 of title XIII of the Act of June 15, 1917 4 (50 U.S.C. 195) is amended by striking the term "the Canal
5 Zone and".
6 (e) Section 1 of the Act of August 9, 1954 (50 U.S.C. 7 196) is amended by striking the term "including the Canal
8 Zone,".
9 ARMS EXPORT CONTROL 10 SEC. 104. Section 38 of the Arms Export Control Act 11 (22 U.S.C. 2778) is amended by striking out subsection (d) 12 thereof.
13 PRIVILEGES AND IMMUNITIES 14 SEC. 105. The Secretary of State shall from among per15 sons recommended by the Panama Canal Commission deter16 mine, and shall maintain and from time to time furnish to the 17 Government of the Republic of Panama, the list of those offi18 cials and other persons who shall enjoy the privileges and 19 immunities accorded under Article VIII of the Panama Canal 20 Treaty of 1977.
21 TERMINATION OF CANAL ZONE GOVERNMENT; TRANSFER 22 OF RECORDS 23 SEC. 106. (a) Sections 1, 2, 3, 31, 32, 33, 333, and 334 24 of title 2 and sections 5081 through 5092 of title 6 of the 25 Panama Canal Code are repealed.
10
9
1 (b) The Panama Canal Commission, other agencies or 2 departments, and United States courts in the Republic of 3 Panama are authorized to transfer any of their records, or 4 copies thereof, including records acquired from the Canal 5 Zone Government or Panama Canal Company such as vital 6 statistics records, to other agencies, departments, or courts of 7 the United States and, if determined by the head of the 8 agency or department concerned to be in the interest of the 9 United States, to the Government of the Republic of 10 Panama. Transfer of records or copies thereof under this sec11 tion to the Government of the Republic of Panama shall be 12 accomplished under the coordination and with the approval of 13 the Ambassador.
14 PAYMENT TO PANAMA; REPEALER 15 SEC. 107. Title I of the Act of November 27, 1973 (87 16 Stat. 636) is amended by striking out the heading "PAY17 MENT TO THE REPUBLIC OF PANAMA" and all that follows 18 under that heading.
19 TITLE II-PANAMA CANAL COMMISSION 20 PART 1-ORGANIZATIONAL MATTERS 21 ESTABLISHMENT; PURPOSES; LOCATION OF OFFICES 22 SEC. 201. (a) Section 61 of title 2 of the Panama Canal 23 Code is amended to read as follows:
10
1 "61. Continuation, purposes, offices, and residence of the
2 Commission
3 "(a) For the purposes of managing, operating, and main4 taming the Panama Canal and its complementary works, in5 stallations, and equipment, and of conducting operations inci6 dent thereto, in accordance with the Panama Canal Treaty of 7 1977 and related agreements, the Panama Canal Commis8 sion is established as a body corporate and as an agency and 9 instrumentality of the United States, and is declared to be the 10 successor to the Panama Canal Company. 11 "(b) The principal office of the Commission shall be lo12 cated in the Republic of Panama in one of the areas made 13 available for the use of the United States under the Panama 14 Canal Treaty of 1977 and related agreements, but the Coin15 mission may establish agencies or branch offices in such other 16 places as it deems necessary or appropriate in the conduct of 17 its business. Within the meaning of the laws of the United 18 States relating to jurisdiction or venue in civil actions, -the 19 Commission is an inhabitant and resident of the District of 20 Columbia, and of the eastern judicial district of Louisiana."
12
PAYMENT OF INTEREST TO UNITED'STATES TREASURY;
2 REPEAL OF REQUIREMENT
3 SEc. 202. (a) Subsection (e) of section 62 of title 2 of
4 -the Panama Canal Code is repealed.
5 (b) Subsection (f) of section 62 of title 2 of the Panama 6 Canal Code is amended by substituting the words "compute 7 its capital surplus account" for "account for its surplus", and 8 by deleting the words "in determining the base for the inter9 est payments required by subsection (e) of this section". 10 (c) Section 70 of title 2 of the Panama Canal Code is 11 amended by deleting the words "in'determining the base for 12 interest payments required by section 62(e) of this title" and 13 by inserting the term "including operating expenses and pay14 ments required by paragraph 5 of Article III and paragraphs 15 4 (a), (b), and (c) of Article XIII of the Panama Canal Treaty 16 of 1977," after the term "working capital requirements,". 17 (d) Section 72 of title 2 of the Panama Canal Code is 18 amended by deleting the words "pursuant to section 62(e) of 19 this title".
20 EXPENDITURES AND PAYMENTS TO PANAMA
13
12
1 of the Panama Canal Treaty of 1977. In determining the 2 adequacy of operating revenues for the purpose of payments 3 to Panama under paragraph 4(c) of that Article, such operat4 ing revenues of a given fiscal period shall be reduced by (1) 5 all costs attributable to the operation, maintenance, and im6 provement of the Canal of that period including (i) operating 7 expenses determined in accordance with generally accepted 8 accounting principles, (ii) payments to Panama under para9 graphs 4(a) and 4(b) of that Article and under paragraph 5 of 10 Article III of the Treaty, and (iii) amounts in excess of del1 preciation and amortization programed to fund requirements 12 for plant replacement, expansion, and improvements; (2) 13 amounts allocated prior to the effective date of an increase in 14 toll rates for the purpose of matching revenues with expenses 15 during the period projected for the increase to remain in 16 effect; (3) the accumulated sum from prior years (beginning 17 with the year in which the Panama Canal Treaty of 1977 18 enters into force) of any excess of such cost requirements of 19 the Commission over operating revenues; and (4) working 20 capital requirements of the Commission as approved annually 21 by its board of directors.".
22 PUBLIC SERVICE PAYMENTS TO PANAMA 23 SEC. 204. Section 62 of title 2 of the Panama Canal 24 Code is amended by adding a new subsection (h) to read as 25 follows:
48-366 0 79 2
14
13
1 "(h) Payments by the Commission to the Republic of 2 Panama for providing public services in accordance with paragraph 5 of Article III of the Panama Canal Treaty of 4 1977 shall be treated for all purposes as an operating cost of
5 the Commission."
ABOARD OF DIRECTORS OF COMSION
7 SEC. 205. Subsection (a) of -section 63 of title 2 of the
8 Panama Canal Code is amended to read as follows:
9 "(a) A board of directors shall manage the affairs of the 10 Panama Canal Commission. The President of the United 11 States shall appoint the members of the board in accordance 12 with paragraph 3 of Article III of the Panama Canal Treaty 13 of 1977, and neither this chapter nor any other law. prevents 14 the appointment and service as a director, or as an officer of 15 the Commission, of an officer- or employee of the United 16 States, or of a person, who is not a national of the United 17 States. Each director so appointed shall, subject to paragraph 18 3 of Article III of the Panama Canal Treaty of .1977, hold 19 office at the pleasure of the President, and, before entering 20 upon his duties, shall take an oath faithfully to discharge the
15
14
1 "(c) The directors shall hold meetings as provided by 2 the bylaws of the Panama Canal Commission. A quorum for 3 the transaction of business shall consist of a majority of the 4 directors of which a majority of those present are nationals of
5 the United States.".
6 ADMINISTRATOR AND DEPUTY
7 SEC. 207. Section 64 of title 2 of the Panama Canal
8 Code is amended to read as follows:
9 "64. Administrator and Deputy 10 "The President of the United States shall appoint the 11 Administrator and Deputy Administrator of the Panama 12 Canal Commission. The Administrator shall, subject to the 13 direction and under the supervision of the board, be the chief 14 executive officer of the Commission. The Administrator and 15 Deputy Administrator shall hold office at the pleasure of the 16 President.".
17 SUITS AGAINST COMMISSION 18 SEC. 208. Paragraph (3) of subsection (a) of section 65 19 of title 2 of the Panama Canal Code is amended to read as 20 follows:
16
15
1 Panama Canal Treaty of 1977, and otherwise by
2 law;
3 "(B) salaries or other moneys owed by the 4 Commission to its employees shall not be subject 5 to attachment, garnishment, or similar process, 6 except as otherwise expressly provided by the
7 laws of the United States; and
8 "(C) it is exempt from any liability for pre9 judgment interest.". 10 APPLICABILITY OF GOVERNMENT CORPORATION CONTROL 11 ACT 12 SEC. 209. The matter preceding clause (1) in subsection 13 (a) of section 66 of title 2 of the Panama Canal Code is 14 amended to read as follows:
15 "(a).Subject to the Government Corporation Control 16 Act (31 U.S.C. sec. 841 et seq.), and to the Panama Canal 17 Treaty of 1977 and related agreements, the Panama Canal 18 Commission may:".,
19 COMMISSION PROPERTY AND ASSETS; DEPRECIATION AND 20 AMORTIZATION
17
16
1 "68. Assets and liabilities
2 "(a) Property and other assets of the Panama Canal 3 Company and of the Canal Zone Government which are not 4 transferred to other United States Government agencies or to 5 the Republic of Panama, or otherwise disposed of, shall, not6 withstanding section 5 of the Act of July 16, 1914, as 7 amended (31 U.S.C. 638(a)), be the property and assets of 8 the Panama Canal Commission from and after the effective 9 date, and except as otherwise provided by law, the Commis10 sion shall assume the liabilities of the Panama Canal Coin11 pany and Canal Zone Government then outstanding. 12 "(b) The Commission may depreciate the Panama 13 Canal, its complementary works, installations, and equip14 ment, and all other property and assets of the Commission, 15 and may amortize over the life of the Panama Canal Treaty 16 of 1977 the right to use certain assets such as housing made 17 available to the United States under that Treaty and related 18 agreements. The value of these use rights, as determined by 19 the Commission, shall be established as an asset on the books 20 of the Commission and amortized over the period of use. 21 "(c) The assets and liabilities referred to in this section 22 shall be deemed to have been accepted and assumed by the 23 Commission without the necessity of any act on the part of 24 the Commission except as otherwise stipulated by section 62 25 of this title.".
18
17
REGULATIONS REGARDING NAVIGATION, PASSAGE, AND
2 PILOTAGE
3 SEC. 211. (a) The introductory phrase to section 1331 4 of title 2 of the Panama Canal Code is amended by striking 5 out the -word "President" and-by inserting in lieu thereof the
6 word "Commission"
7 (b) Paragraph (1) of section 1331 of title 2 of the 8 Panama Canal Code is amended by striking out the words 9. "harbors and other waters of the Canal Zone"! and by inse rt10 ing in lieu thereof the words "waters of the Panama Canal 11 and areas adjacent thereto including the ports of Balboa and 12 Cristobal".
13 (c) Paragraph (4) of section 1331 of title 2 of the 14 Panama Canal Code is amended by striking out the words 15 "waters of the Canal Zone" and by inserting in lieu thereof 16 the words "waters of the Panama Canal and areas adjacent 17 thereto including the ports of Balboa and Cristobal". 18 FUNDS AND ACCOUNTS; FURNISHING OF SERVICES; 19 REIMBURSEMENT 20 SEC. 212. (a) Section 231 of title 2 -of the Panama
19
18
1 "232. Furnishing of services; reimbursements (a) The Department of Defense shall reimburse the 3 Panama Canal Commission for amounts expended by the 4 Commission in maintaining defense facilities in standby con5 dition for the Department of Defense.
6 "(b) Such agency as the President may designate is au7 thorized to provide educational and health care services to 8 persons eligible to receive such services under the Panama 9 Canal Treaty of 1977 and related agreements. Notwithstand10 ing any other law, the appropriations of such agency are 11 made available -for conducting. educational .and health. care 12 activities, including kindergartens and college, formerly car13 nied out by the Canal Zone Government, and for providing 14 the services related thereto.
15 "(c) Amounts so expended for furnishing services to per16 sons eligible to receive them under the Panama Canal Treaty 17 of 1977 and related agreements, less amounts payable by 18 such persons, shall be fully reimbursable to the agency fur19 nishing the services, except to the extent that such expendi20 tures are the responsibility of that agency. The appropri.-
20
19
1 agencies conducting operations in the Republic of Panama, 2 including the Smithsonian Institution, are made available for 3 reimbursements on behalf of employees of such agencies and
4 their dependents.
5 "(d) The appropriations or funds of United States agen6 cies conducting operations in the Republic of Panama are 7 made available. to defray the -cost of (i) health care services to 8 elderly or disabled persons who were eligible to receive such 9 services prior to the effective date, less amounts payable by 10 such -persons, and (ii) educational services provided by 11 schools in the Republic of Panama which are not operated by 12 the United States to persons Who were receiving such serv13 ices at the expense of the Canal Zone Go.,ernment prior to 14 the effective date.".
15 (c) Section 233 of title 2 of the Panama Canal Code is 16 amended by striking the terms "Canal Zone Government or 17 the Panama Canal Company" and by inserting in lieu thereof 18 the term "Panama Canal Commission".. 19 (d) Section 234 of title. 2 of the Panama_ Canal Code is 20 amended by striking the term "Canal Zone" and by inserting 21 in lieu thereof the term "Panama Canal-Commission". 22 (e) Section 235 of title 2 of the Panama Canal Code is 23 amended by striking the term "Canal Zone Government and 24 the Panama Canal Company" and by-inserting in lieu thereof 25 the term "Panama Canal Commission".
21
20
1 PUBLIC PROPERTY AND PROCUREMENT; TRANSFERS AND
2 CROSS SERVICING
3 SEC. 213. (a) Section 371 of title 2 of the Panama
4 Canal Code is repealed.
5 (b) Section 372 of title 2 of the Panama Canal Code is
6 amended to read as follows:
7 "372. Transfers and cross,-servicing between agencies
8 "tg(a) -In: the interest of: economy and maximum efficiency 9 in the utilization of Government 'property and facilities, there 10 are authorized to be transferred, notwithstanding section 5 of 11 the Act of July 16, 1914, as amended (31 U.S.C. 638(a)), 12 between departments and agencies, with or without exchange 13 of funds, all or so much of the* facilities, buildings, structures, 14 improvements, stock, and equipment of their activities, locat15 ed in the Republic of Panama as may be mutually agreed 16 upon by the'departments and agencies involved and approved 17 by the President of the United States or his designee. With 18 respect to transfers without exchange of funds, transfers to or 19 from the Panama Canal Commission are subject to section 62 20 of this title, as amended.
22
21
1 "(c) The provisions of subsections (a) and (b) above shall
2 be applicable to the Smithsonian Institution.".
3 PART2-TOLLS
4 MEASUREMENT RULES; CHANGES IN RATES
5 SEC. 230. Section 411 of title 2 of the Panama Canal
6 Code is amended to read as follows:
7 411. Prescription of measurement rules and tolls
8 "(a) The Panama Canal Commission may prescribe, and
9 from time to time change
10 "(1) the rules for the measurement of vessels for 11 the Panama Canal; and 12 "(2) subject to section 412 of this title, the tolls 13 that shall be levied for the use of the Canal. 14 "(b) The Commission shall give three months' notice, by 15 publication in the Federal Register- of proposed changes in 16 basic rules of measurement or in rates of tolls, during which 17 period a public hearing shall be conducted. Changes in basic 18 rules of measurement and changes in rates of tolls shall be 19 subject to and shall take effect upon the approval of the 20 President of the United States, whose action in such matters
23
22
1 amended by section 232 of this Act, the Panama Canal Corn2 pany is authorized, in advance of that date, to change the 3 rates, effective on the effective date, such change to be sub4 ject to the approval of the President whose action in the 5 'matter Thall be final. If and to the extent that time permits, 6 the Company shall give three months' notice, by publication 7 in the Federal Register, of such proposed changes in rates 8 of tolls, during which period a public hearing shall be
9 conducted.
10 BASES OF TOLLS 11 SEC. 232. (a) Subsection (b) of section 412 of title 2 of 12 the Panama Canal Code is amended to read as follows: 13 "(b) Tolls shall be prescribed at rates calculated to 14 cover as nearly as practicable all anticipated costs of main15 taining and operating the Panama Canal, together with the 16 facilities and appurtenances related thereto, including depre17 'ciation; of assets, amortization of use rights, and the pay8 ments. to Panama pursuant to paragraph 5 of Article III and
-19 paragraphs 4(a) and 4(b).1 of :Article XIII of the Panama 20 canal Treaty of 1977.:-In.. determining the rates of tolls, there 21 may also be taken into account unrecovered past costs, fund22 ing required to establish or maintain a capital reserve ac23 count programed to fund requirements for plant replacement, 24 expansion, and' improvements, and the necessity of establish2.5 -ing. reserves for tie purpose of matching revenues with ex-
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1 penses during the period projected for a given toll rate to
2 remain in effect.".
3 (b) Subsection (c) of section 412 of title 2 of the Panama
4 Canal Code is amended to read as follows:
5 "(c) Vessels operated by the United States, including 6 vessels of war and auxiliary vessels, and ocean-going training 7 ships owned by the United States and operated by State nau8 tical schools, shall pay tolls.".
9 (c) Subsection (d) of section 412 of title 2 of the Panama 10 Canal Code is amended by deleting the words "of articles 11 XVIII and XIX of the convention between the United States 12 and Panama concluded on November 18,. 1903, and", by in13 seating a comma in place of the period- at the end of the 14 subsection, and by adding thereafter "and of Articles II, III, 15 and VI of the Treaty Concerning the Permanent Neutrality 16 and Operation of the Panama Canal, between the United 17 States of America and the Republic of Panama, signed Sep18 tember 7, 1977.".
19 PART 3-CLAIMS 20 MEASURE OF DAMAGES; TIME FOR FILING; BOARD OF 21 LOCAL INSPECTORS 22 SEC. 260. chapter IL oftitle :2 of the Panama Canal: 23 Code is amended as follows: ... ..- : 24 (a) The title of the chapter is amended to read 25 "CLAIMS ARISING FROM OPERATION OF CANAL."
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1 (b) Section 271 of title 2 of the Panama Canal Code is
2 repealed.
3 (c) The headings of subchapters I and II are deleted. 4 (d) Section 291 of title 2 of the Panama Canal Code is
5 amended as follows:
6 (1) The period at the end of the first sentence is 7 changed to a comma, and the following language is 8 added: "unless it is established that the injury was not 9 proximately caused by the negligence or fault of any of 10 its officers or employees acting within the scope of his 11 employment and in the line of his duties in connection 12 with the operation of the Canal.". 13 (2) In the fourth sentence, the words, "the side" 14 are amended to read "any portion of the hull". 15 (e) Section 293 of title 2 of the Panama Canal Code is 16 amended to read as follows:
17 " 293. Measure of damages 18 "(a) In determining the amount of the award of damages 19 for injuries to a vessel for which the Panama Canal Gommis20 sion is determined to be liable, there-may be included21 "(1) actual or estimated cost of repairs; 22 "(2) charter hire actually lost by the owners, or 23 charter hire actually paid, depending upon the terms of 24 the charter party, for only the time the vessel is actu25 ally undergoing repairs, on drydock or otherwise;
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1 "(3) maintenance of the vessel and wages of the 2 crew, if they are found to be actual additional expenses 3 or losses incurred outside of the charter hire, for only 4 the time the vessel is actually undergoing repairs, on
5 drydock or otherwise; and
6 "(4) except as prohibited by subsection (b) of this 7 section, or by any other provision of law, other ex8 penses which are definitely and accurately shown to 9 have been incurred necessarily and by reason of the 10 accident or injuries.
11 "(b) Agent's fees or commissions, general average ex12 penses, attorney's fees, bank commissions, port changes or 13 other incidental expenses of similar character, or any items 14 which are indefinite, indeterminable, speculative, or conjec15 tural shall not be allowed.
16 "(c) The Commission shall be furnished such vouchers, 17 receipts, or other evidence as -may be necessary in support of 18 any item of a claim. If a vessel is not operated under charter 19 but by the owner directly, evidence shall be secured if availa20 ble as to the sum for which vessels of the same size and class
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26d 6
ing the vessel's earnings about the time of the accident or *injuries shall be considered as evidence of probable earnings 3 during the time of detention. If the books are unavailable, 4 such other evidence shall be furnished as may be necessary.". 5 (f) Section 294 of title 2 of the Panama Canal Code is 6 amended by deleting the word "or" in paragraph (5), by re7 numbering the present paragraph (6) as paragraph (7), and by
8 inserting a new paragraph (6) to read as follows:
9 "(6) time necessary for investigation of marine ac10 cidents; or".
11 (g) Section 296 of title 2 of the Panama Canal Code is 12 amended by deleting the words "United States District Court
-13. for the District of the Canal Zone" in the first sentence and 14 inserting in lieu thereof the words "United States District 15 Court for the Eastern District of Louisiana". 16 (h) The present section 297 of title 2 of the Panama 17 Canal Code is designated as subsection (a), and a new sub18 section (b) is added to read as follows: 19 "(b) Lack of knowledge on the part of the master, offi20, cers, crew, or passengers that an accident giving rise to a
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1 "298. Time for presenting claim and commencing action 2 "A claim against the Commission under this chapter 3 shall be forever barred unless it is presented in writing to 4 that agency within two years after such claim accrues or 51 unless action is begun within one year after the date of mail6 ing of notice of final decision on the claim by the Commis7 sion."
8 ()A new section 299 of title 2, of the Panama Canal
9 Code is added, to read as follows: 10 " 299. Board of Local Inspectors 11 "(a) There is established a Board of Local Inspectors of 12 the Panama Canal, Commission which shall perform, in ac13 cordance with regulations prescribed by the Commission14 "(1 the investigations called for by section 297 of 15 this chapter; and
16 "(2) such other duties in matters of a marine 17 character as it may be assigned by the Commission. 18 "(b) The Commission shall, by regulation, designate the 19 members of the Board and establish procedures by which the 20 Board carries out its functions.
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1 PART 4-SEA LEVEL CANAL STUDY
2 UNITED STATES-PANAMA JOINT COMMITTEE; STUDY
3 SEC. 270. (a) The President shall appoint the repre4 sentatives of the United States to any joint committee or 5 body with the Republic of Panama to study the possibility of 6 a sea level canal in the Republic of Panama pursuant to Arti7 cle XII of the Panama Canal Treaty of 1977.
8 (b) Upon the completion of any joint study between the 9 United States and the Republic of Panama concerning the 10 feasibility of a sea level canal in the Republic of Panama 11 pursuant to paragraph 1 of Article XII of the Panama Canal 12 Treaty of 1977, the text of the study shall be transmitted by 13 the President to the President of the Senate and to the 14 Speaker of the House of Representatives. 15 (c) No construction of a sea level canal by the United 16 States in the Republic of Panama shall be undertaken except 17 with express congressional authorization after submission of 18 the study by the President as provided in subsection (b). 19 TITLE III-EMPLOYEES AND POSTAL MATTERS 20 PART 1-EMPLOYMENT SYSTEM 21 REPEALERS AND CHANGES IN CANAL ZONE CODE 22 SEC. 301. (a) Sections 101, 102, 122, 123, 147, and 23 154 of title 2 of the Panama Canal Code are repealed. 24 (b) Section 103 of title 2 of the Panama Canal Code is 25 amended by striking the terms "Canal Zone Government,
'48-366 0 79 3
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1 Panama Canal Company" and inserting in lieu thereof the 2 term "Panama Canal Commission", and by redesignating
3 that section as section 122 of that title and code.
4 DEFINITIONS
5 SEC. 302. Section 141 of title 2 of the Panama Canal
6 Code is amended as follows:
7 (a) The definition of the word "department" is amended 8 to read as follows: "'department' means (i) the Panama 9 Canal Commission, and (ii) an executive agency (within the 10 meaning of section 105 of title 5 of the United States Code) 11 which makes an election under section 142(b) of this chap12 ter;".
13 (b) The definition of the word "position" is amended to 14 read as follows: "'position' means those duties and responsi15 bilities of a civilian nature under the jurisdiction of a depart16 ment which are performed in the Republic of Panama.". 17 PANAMA CANAL EMPLOYMENT SYSTEM 18 SEC. 303. Section 142 of title 2 of the Panama Canal 19 Code is amended by redesignating subsection (b) thereof as 20 subsection (d), and by striking the caption and subsection (a) 21 thereof and inserting in lieu thereof the following: 22 " 142. Panama Canal Employment System
23 "(a) The Panama Canal Commission shall conduct its 24 wage and employment practices in accordance with a
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1 Panama Canal Employment System which shall be estab2 lished in accordance with
3 "(1) the principles established in the Panama 4 Canal Treaty of 1977 and ?related agreements, and 5 with the provisions of this chapter and other applicable
6 law; and
7 "(2) regulations promulgated by, or under the au8 thority of, the President in accordance with this chap9 ter and taking into account any recommendation of the 10 Panama Canal Commission. 11 "(b) The head of an executive agency other than the 12 Panama Canal Commission may elect to have the Panama 13 Canal Employment System made applicable in whole or in 14 part to personnel of his agency in the Republic of Panama. 15 "(c) The provisions of chapter 71 of title 5 of the United 16 States Code shall not apply to the Panama Canal Commis17 sion or to its personnel. In lieu thereof, the President shall 18 establish a form of collective bargaining, applicable to the 19 Commission's employees; into which is incorporated the sub20 stance of sections 7102, 7106, 7116, 7120, and 7131. The 21 form of collective bargaining so established shall contain such 22 other necessary provisions, and shall be administered, so as 23 to provide the Commission' s employees with the right to bar24 gain collectively under the same conditions and with respect 25 to the same subject matter that obtains where that right is
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1 exercised generally in the Federal service within the conti2 nental United States.".
3 CONTINUATION OF CANAL ZONE MERIT SYSTEM
4 SEC. 304. Notwithstanding other provisions of this 5 chapter, the provisions of subchapter III of chapter 7 of title 6 2 of the Panama Canal Code establishing the Canal Zone 7 Merit System, and the administrative regulations promulgat8 ed thereunder, shall continue in effect until such time as the 9 Panama Canal Employment System has been established 10 pursuant to section 303 of this Act. 11 OVERSEAS RECRUITMENT AND RETENTION 12 SEC. 305. (a) Section 144 of title 2 of the Panama 13 Canal Code is amended by deleting subsection (d) thereof. 14 (b) Section 146 of such Code is amended to read as 15 follows:
16 " 146. Recruitment and retention remuneration 17 "(a) In addition to basic compensation, additional remu18 neration in such amounts as the head of the department con19 cerned determines, may be paid as overseas recruitment and 20 retention differentials to the following categories of individ-
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1 "(1) persons employed by the Panama Canal 2 Company, Canal Zone Government or a department in
3 the Canal Zone prior to the effective date;
4 "(2) persons thereafter recruited outside of 5 Panama for a position in the Republic of Panama; and 6 "(3) medical doctors employed by the Department
7 of Defense or Panama Canal Commission.
8 "(b) Employees who fall into more than one of the three 9 categories described in subsection (a) of this section may 10 qualify for additional remuneration under only one of those 11 categories.
12 "(c) Additional remuneration prescribed under this sec13 tion may not exceed 25 percent of the rate of basic compen14 sation for the same or similar work performed in the conti15 nental United States by employees of the Government of the 16 United States.".
17 TRANSFER OF FEDERAL EMPLOYEES TO COMMISSION 18 SEC. 306. (a) Title 2 of the Panama Canal Code is 19 amended by adding after section 146 a new section 147 to 20 read as follows:
21 " 147. Transfer of Federal employees to Panama Canal 22 Commission
23 "The head of any Federal agency, including the United 24 States Postal Service, is authorized to enter into agreements 25 for the transfer or detail of that agency's employees, serving
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1 under permanent appointment, to the Panama Canal Com2 mission. Under regulations prescribed by the Office of Per3 sonnel Management, any employee so transferred or detailed 4 shall, upon completion of his tour of duty with the Commis5 sion, be entitled to reemployment with the agency from 6 which he was transferred or detailed without loss of pay, 7 seniority or other rights or benefits to which he would have 8 been entitled had he remained on the rolls of that agency.". 9 (b) Section 148 of title 2 of the Panama Canal Code is 10 amended by11 (1) changing the parenthetical citation "(5 U.S.C., 12 sec. 2091 et seq.)" in paragraph (1) to read "(5 U.S.C. 13 8701 et seq.)";
14 (2) changing the parenthetical citation "(5 U.S.C., 15 sec. 751 et seq.)" in paragraph (2) to read "(5 U.S.C. 16 8101 et seq.)";
17 (3) changing the parenthetical citation "(5 U.S.C., 18 sec. 2251 et seq.)" in paragraph (4) to read "(5 U.S.C. 19 8331 et seq.)"; and
20 (4) revising the unindented portion of the section 21 following paragraph (6) to read as follows: "the basic 22 compensation of each employee shall include the rate 23 of basic compensation established for his position, and, 24 where appropriate, the amount of overseas recruitment 25 and retention differentials, determined in the manner
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34
1 respectively provided by sections 144 and 146 of this
2 title.".
3 MERIT AND OTHER EMPLOYMENT REQUIREMENTS
4 SEc. 307. Section 149 of title 2 of the Panama Canal
5 Code is amended to read as follows:
6 " 149. Merit and other employment requirements
7 "(a) Subject to this subchapter, the President may, from 8 time to time and taking into account any recommendation of 9 the Panama Canal Commission, amend or modify the provi10 sions of the Panama Canal Employment System, including 11 provisions relating to selection for appointment, reappoint12 ment, reinstatement, reemployment, and retention, with re13 spect to positions, employees, and individuals under consider14 ation for appointment to positions, established by regulations 15 under section 142 of this chapter. 16 ',(b) The Panama Canal Employment System shall17 "(1) subject to and as limited by the Panama 18 Canal Treaty of 1977 and related agreements, be 19 based on the merit of the employee or individual and 20 upon his qualifications and fitness to hold the position 21 concerned;
22 "(2) conform generally to policies, principles, and 23 standards for the competitive civil service of the Gov24 emnent of the United States; and
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35
1 "(3) include provision for appropriate interchange, 2 between the Panama Canal Employment System and 3 the competitive civil service of the Government of the 4 United States, of citizens of the United States em5 ployed by the Government of the United States.".
6 REGULATIONS; EXAMINING OFFICE
7 SEC. 308. Section 155 of title 2 of the Panama Canal 8 Code is amended by redesignating subsection (b) thereof as 9 subsection (c), and by inserting in lieu of subsection (a) there10 of the following:
11 "(a) The President shall issue regulations necessary and 12 appropriate to carry out the provisions and accomplish the 13 purposes of this subchapter and, in the event of any election 14 under section 142(b), coordinate the policies and activities 15 under this subchapter of the departments involved. 16 "(b) In order to assist in carrying out his coordination 17 responsibility under subsection (a) and in implementing the 18 provisions of the Panama Canal Treaty of 1977 and related 19 agreements relating to recruitment, examination, determina20 tion of qualification standards and similar matters, the Presi21 dent may establish, as the successor to the Canal Zone Cen22 tral Examining Office, an office which shall be an entity 23 within the Panama Canal Commission."
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1 COMPENSATION OF MILITARY, NAVAL OR PUBLIC HEALTH
2 SERVICE PERSONNEL SERVING COMMISSION
3 SEC. 309. Subsection (a) of section 201 of title 2 of the 4 Panama Canal Code is amended by deleting the words "Gov5 ernor of the Canal Zone and President of the Panama Canal 6 Company, or as Lieutenant Governor of the Canal Zone and 7 Vice President of the Panama Canal Company," "and insert8 ing in lieu thereof the words "Administrator or Deputy Ad9 ministrator of the Panama Canal Commission." 10 APPLICABILITY TO SMITHSONIAN INSTITUTION 11 SEC. 310. The provisions of this chapter shall be appli12 cable to Federal employees of the Smithsonian Institution. 13 PART 2-CONDITIONS OF EMPLOYMENT, PLACEMENT, 14 AND ]RETIREMENT 15 TRANSFERRED EMPLOYEES 16 SEC. 321. Title 2 of the Panama Canal Code is amend17 ed by adding a new section 202 to read as follows: 18 "202. Transferred employees 19 "With respect to employees of the Panama Canal Coin20 pany or Canal Zone Government who are transferred to em-
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1 terms and conditions of employment with the Panama Canal 2 Company and Canal Zone Government immediately prior to
3 that date:
4 "Wage rates; tropical differential; premium pay and 5 night differential; reinstatement and restoration rights; injury 6 and death compensation benefits; leave and travel, except as 7 modified to provide equity with other employees within the 8 agency to which the employee is transferred; transportation 9 and repatriation benefits; group health and life insurance; re10 duction-in-force rights; an employee grievance system, and 11 the right to appeal adverse and disciplinary actions as well as 12 position classification actions; veteran's preference eligibility; 13 holidays; saved pay provisions; and severence pay benefits.". 14 PLACEMENT 15 SEC. 322. Title 2 of the Panama Canal Code is amend16 ed by adding a new section 203 to read as follows: 17 " 203. Placement
18 "(a) A United States citizen who, immediately preced19 ing the effective date of exchange of instruments of ratifica20 tion of the Panama Canal Treaty of 1977, was an employee 21 of the Panama Canal Company or Canal Zone Government, '22 who separates or is scheduled to separate on that date or 23 thereafter in accordance with the program established under 24 subsection (c) of this section for any reason other than mis25 conduct or delinquency:, and who is not placed in another
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appropriate position with the United States Government in 2 the Republic of Panama shall, upon the employee's request, 3 be accorded appropriate placement assistance to vacancies 4 with the United States Government in the United States. 5 "(b) A United States citizen who, immediately preced6 ing the effective date of exchange of instruments of ratifica7 tion of the Panama Canal Treaty of 1977, was an employee 8 of an agency of the United States Government, or a Federal 9 employee of the Smithsonian Institution, in the Canal Zone 10 Other than the Panama Canal Company or Canal Zone Gov11 ernment, whose position is eliminated as the result of imple12 menting the Panama Canal Treaty of 1977 or related agree13 ments, and who is not placed in another appropriate position 14 with the United States Government in the Republic of 15 Panama shall, upon the employee's request, be accorded the 16 placement assistance provided for in subsection (a). 17 "(c) The Office of Personnel Management shall develop 18 and administer a Federal Government-wide placement pro19 gram for all eligible employees who request placement assist20 ance under this section.".
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1 204. Educational travel benefits
2 "Dependents of United States citizen employees of the 3 Panama Canal Commission who are eligible for educational 4 travel benefits under regulations issued by the Commission 5 shall be entitled to one round trip per year for undergraduate 6 studies in the United States until they reach their 23d
7 birthday-".
8 ADJUSTMENT OF COMPENSATION FOR LOSS OF BENEFITS
9 SEC. 324. United States citizen employees of the 10 Panama Canal Commission shall be paid an allowance to 11 offset the increased cost of living that may result from the 12 withdrawal of the eligibility of such employees and their de13 pendents to use military postal services, sales stores and ex14 changes five years after the date of entry into force of the 15 Panama Canal Treaty of 1977. The amount of the additional 16 compensation shall be determined by the Panama Canal 17 Commission.
18 EARLY RETIREMENT ELIGIBILITY 19 SEC. 325. Section 8336 of title 5 of the United States 20 Code is amended-
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1 ment immediately prior to the effective date of exchange of 2 instruments of ratification or entry into force of the Panama 3 Canal Treaty of 1977, who is separated from the service 4 prior to January 1, 2000, and, upon separation, meets the 5 age and service requirements in paragraph (1), or who is sep6 arated within 2 years prior to meeting the age and service 7 requirements in paragraph (1) is entitled to an annuity."; and 8 (2) by redesignating subsection (h) as subsection 9 (k) and inserting new subsections (h), (i), and (j) to read 10 as follows:
11 "(h) An employee of the Panama Canal Commission or 12 of an Executive agency conducting operations in the Canal 13 Zone or Republic of Panama, who is separated from the serv14 ice prior to January 1, 200015 "(1) involuntarily, as a result of the implementa16 tion of the Panama Canal Treaty of 1977 or related 17 agreements, except by removal for cause on charges of 18 misconduct or delinquency, after completing 20 years 19 of service;
20 "(2) voluntarily, after completing 25 years of 21 service or after becoming age 50 and completing 20 22 years of service; or
23 "(3) involuntarily, as a result of the implementa24 tion of the Panama Canal Treaty of 1977 or related 25 agreements, except by removal for cause on charges of
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1 misconduct or delinquency, or voluntarily within 2 2 years prior to meeting the age and/or service require3 ments in paragraph (2) is entitled to an annuity if he-4 "(A) was employed by the Canal Zone Gov5 ernment or the Panama Canal Company immedi6 ately prior to the effective date of exchange of in7 struments of ratification or entry into force of the
8 Panama Canal Treaty of 1977; and
9 "(B) has been continuously employed by the 10 Panama Canal Commission or by an Executive 11 agency conducting operations in the Canal Zone 12 or the Republic of Panama since the effective date 13 of exchange of instruments of ratification of the 14 Panama Canal Treaty of 1977 or its entry into 15 force.
16 "(i) An employee of the Panama Canal Commission or 17 of an Executive agency conducting operations in the Canal 18 Zone or Republic of Panama, who is separated from the serv19 ice as a result of the implementation of the Panama Canal 20 Treaty of 1977 or related agreements, prior to January 1, 21 2000, involuntarily, except by removal for cause on charges 22 of misconduct or delinquency-23 "(1) after completing 20 years of service; or
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1 "(2) within 2 years prior to meeting the age and/ 2 or service requirements in paragraph (2) of subsection
3 (h) of this section is entitled to an annuity if he4 "(A) was employed in the Canal Zone by an 5 Executive agency other than the Panama Canal 6 Company or the Canal Zone Government immedi7 ately prior to the effective date of exchange of in8 struments of ratification or entry into force of the
9 Panama Canal Treaty of 1977; and 10 "(B) has been continuously employed by the 11 Panama Canal Comm-ission, or an Executive
1 agency conducting operations in the Canal Zone 13 or the Republic of Panama since the effective date 14 of exchange of instruments of ratification of the 15 Panama Canal Treaty of 1977 or its entry into 16 force.
17 "(j) For the purpose of subsections (h) and (i) of this 18 section, Federal employment by or under the United States 19 District Court for the District of the Canal Zone and by the 20 Smithsonian Institution shall be treated as employment by an 21 'Executive agency.' ".
22 EARLY RETIREMENT COMP-UTATION 23 SEc. 32G. Section 8339 of title 5 of the United States 24 Code is amended-
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1 (1) by inserting in subsection (f), immediately after 2 "subsections (a) through (e)", the following: "and (n)"; 3 (2) by inserting in subsection (i), immediately after 4 "subsections (a) through (h)", the following: "and (n)'"; 5 (3) by inserting -in subsections (j) and (k)(1), imme6 diately after "subsections (a) through (i)" each time it
7 appears, the following: "and (n)";
8 (4) by inserting in subsection 0), immediately after 9 "subsections (a) through (k)", the following: "and (n)"; 10 (5) by inserting in subsection (m), immediately 11 after "subsections (a) through (e)", the following: "and 12 (n)"; and
13 (6) by adding at the end thereof new subsections 14 (n), (o), and (p) to read as follows: 15 "(n) The annuity of an employee retiring under this sub16 chapter who was employed by the Panama Canal Company 17 or Canal Zone Government immediately prior to the entry 18 :into force of the Panama Canal Treaty of 1977, who contin19 ues in employment with the Panama Canal Commission, or 20 with another Executive agency or. the Smithsonian Jnstitu21 tion, in the Republic of Panama is computed with respect to 22 the period of that service performed on a continuous basis 23 after the entry into force of the Panama Canal Treaty of 24 1977 by multiplying-...
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1 "(A) 21/2 percent of the employee's average pay 2 by so much of such service as does not exceed 20
3 years; plus
4- "(B) 2 percent of the employee's average pay 5 multiplied by so much of such service as exceeds 20
6 years.
7 "(o) The annuity computed under subsection (n) of this
_8 section_ for _an employee -who was employedas a law enforce9 ment officer or firefighter shall be increased by $8 for each 10 full month of such service in the Republic of Panama after 11 the entry into force of the Panama Canal Treaty of 1977. 12 This increase in annuity shall not be paid with respect to 13 service performed after completion of 20 years as a law en14 forcement officer or firefighter. 15 "(p) The annuity computed under this subchapter for an 16 employee who was employed as a law enforcement officer or 17- firefighter by the Panama Canal Company or the Canal Zone 18 Government immediately prior to the effective date of ex19 change of instruments of ratification or entry into force of the 20 Panama Canal Treaty of 1977, who does not qualify for re21 tirement under section 8336(c) of this title, shall be increased 22 by $12 for each full month of such service prior to the entry 23' into force of the PanamaCanal Treaty of 1977. This increase 24 in annuity shall not be paid with respect to service performed
48-366 0 79 -
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1 after completion of 20 years as a law enforcement officer or ,2 firefighter.
3 EMPLOYEES OF RELATED ORGANIZATIONS
4 SEC. 327. (a) For the purposes of sections 202, 203, 5 and 204 of title 2 of the Panama Canal Code, as amended by 6 sections 321, 322, and 323 of this Act, and sections 325 and 7 326 of this Act, the United States Attorney for the District 8 of the Canal Zone and the Assistant United States Attorneys 9 and their clerical assistants, and the United States Marshal 10 for the District of the- Canal Zone and his deputies and cleri11 cal assistants, shall be treated the same as employees of the 12 Panama Canal Commission.
13 (b) For the purposes of this Act, the Executive Director 14 of the Canal Zone Civilian Personnel Policy Coordinating 15 Board, the Manager, Central Examining Office, and their 16 staffs shall be considered employees of the Panama Canal 17 -Company for service prior to the entry into force of the 18 Panama Canal, Treaty of 1977 and as employees of the 19 Panama Canal Commission for service on or after that date. 20 APPLICABILITY OF BENEFITS TO NONCITIZENS
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1 tive date and who are covered by the Social Security System 2 of the Republic of Panama pursuant to the Panama Canal
3 Treaty of 1977 and related agreements.
4 (b) Subelause (B) of clause (9) of section 8701(a) of title 5 5 of the United States Code, relating to the definition'of
6 "employee", is amended to read as follows:
7 "(B) an employee who is not a citizen or national 8 of the United States and whose permanent duty station 9 is outside the United States, unless such person was an 10 employee for the purpose of this chapter on the day 11 before the effective date by virtue of service With a 12 Federal agency in the Canal Zone, or the Smithsonian 13 Institution; or".
14 (c) Subclause (H) of clause (1) of section 8901 of title 5 15 of the United States Code, relating to the definition of "em16 ployee", is amended by striking out item (ii) and inserting in 17 lieu thereof the following:
18 "(ii) an employee who is not a citizen or national 19 of the United States and whose permanent duty station 20 is outside the United States unless such person was an 21 employee for the purpose of this chapter on the day 22 before the effective date by virtue of service with a 23 Federal agency in the Canal Zone or the Smithsonian 24 Institution; or"
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.1 NON-UNITED STATES CITIZEN RETIREMENT
2 SEC. 3299. (a) Under such regulations as the. President. 3 may prescribe,, there shall be paid to the Social Security 4 System of the Republic of Panama, out of funds deposited in 5 the Treasury of -the United States to the credit of the Civil 6 Service Retirement Fund under section 8334(a)(2) of title 5 7 of -the United States Code, such sums of money as may be necessary to aid in the purchase of a retirement equity in that 9 System for each person who is separated from employment .10 with the Panama Canal Company, the Canal Zone Govern111 ment,'or the Panama Canal Commission, as the result of the 12 implementation of the Panama Canal Treaty of. 1.977 or re13 lated agreements, and becomes employed under the Social 14 Security System of the Republic of Panama through the 15 transfer of a function or activity to the Republic of Panama 16 from the United States or through a job placement assistance 17 program, provided such person18, (1) has been credited with at least five years of 19 Federal service under the United States Civil Service 20 Retirement System;
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1 ment System and transfer it to the Social Security
*2 System of the Republic of Panama pursuant to the 3 special regime referred to in paragraph 3 of Article 4 VIII of the Agreement in Implementation of Article
5 III of the Panama Canal Treaty of 1977.
6 (b) The sums of money made available under subsection 7 (a) shall not exceed, in any case, the amount of the employee 8 contribution withdrawn from the fund and paid over to the
9 Panamanian Social Security System. 10 (c)(1) Pursuant to paragraph 2(b) of Annex C to the 11 Agreement in Implementation of Article IV of the Panama 12 Canal Treaty of 1977, there are authorized to be appropri13 ated such sums of money as may be necessary to purchase a 14 nontransferable deferred annuity for the benefit of each em15 ployee of the United States Forces, including employees of 16 all nonappropriated fund activities of the Department Of De17 fense, in the Republic of Panama18 (A) who is not a citizen of the United States of 19 America;
20 (B) who was employed prior to and is employed 21 upon the effective date by an instrumentality of the 22 United States Government in the Republic of Panama 23 (including,. in the case of employment prior to such 24 date, the former Canal Zone);
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1 (C) who, for any period of his or her employment 2 with that instrumentality of the United States Govern3 ment prior to the effective date was not covered by a 4 retirement program for the full period of employment; 5 (D) who, on the effective date is under a retire6 ment system provided by the United States or an in7 strumentality of .the United States Government, or 8 would have been eligible to be under a retirement 9 system of such instrumentality had one been available 10 during previous creditable service; and 11 (E) who, on the effective date has at least five 12 years of creditable service. 13 (2) The President of the United States, or his designee, 14 shah' pay out of the general funds of the United States Treas15 ury such sums as are appropriated pursuant to subsection 16 (c)(1) of this section in accordance with such regulations as 17 the President or his designee may prescribe. 18 (3) The annuity referred to in subparagraph (c)(1) above 19 will cover retroactively, from the effective date, all periods of .20,- creditable service of Isuch persons I-with United States Gov-
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1 coverage for the individuals referred to in subparagraph (c)(1) 2 above in the Social Security System of the Republic or 3 Panama for periods of employment with the United States 4 Government or its instrumentalities prior to the effective
5 date.
6 TECHNICAL AMENDMENTS
7 SEC. 330. (a) Section 5316(87) of title 5 of the United 8 States Code is amended by striking out "Governor of the 9 Canal Zone" and substituting in lieu thereof "Administrator 10 of the Panama Canal Commission." 11 (b) Section 63 22(a) of title 5 of the United States Code 12 is amended by deleting the words "the Canal Zone, or", by 13 inserting a comma in place of the period after "the Trust 14 Territory of the Pacific Islands" at the end of the same sen15 tence, and by adding thereafter "or the Republic of 16- Panama."
17 (c) Subchapter III of chapter 59 of title 5 of the United 18 States Code, pertaining to Overseas Differentials and 19 Allowances, is inapplicable to employees assigned to work in 20 the Republic of Panama for the Panama Canal Commission
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1 the United States pursuant to the Panama Canal Treaty of
2 1977 and related agreements:
3 (1) section 5595(a)(2)(iii); 4 (2) section 5724a(a); and
5 (3) section 8102(b).
6 (e) Section 1(b) of the Act of April 14, 1966, (20 U.S.C. 7 903(c)) and section 6(a) of the Act of July 17, 1959 (20 8 U.S.C. 904(a)(2)) are inapplicable to teachers who are em9 ployed by the Canal Zone Government school system imme10 diately prior to the effective date and are transferred to the 11 Department of Defense Overseas Dependent School System. 12 (f) Section 5102(c)(12) of title 5 of the United States 13 Code is amended to read as follows: 14 "(12) employees whose pay is fixed under authori15 ty and regulations of the Panama Canal Employment 16 System;".
17 PART 3-POSTAL MATTERS 18 POSTAL SERVICE 19 SEC. 341. (a) The postal service established and gov20 erned by chapter 73 of title 2 of the Panama Canal Code 21 shall be discontinued upon the effective date. 22 (b) The provisions of such chapter 73 relating to postal23 savings deposits, postal-savings certificates, postal money 24 orders, and the accounting for funds shall continue to apply 25 for the purpose of meeting the obligations of the United
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1 States concerning outstanding postal savings and money
2 orders and disposition of funds.
3 (c) The Panama Canal Commission shall take posses4 sion of and administer the funds of the postal service and 5 shall assume its obligations. The Commission and the United 6 States Postal Service are authorized to enter into agreements 7 for the transfer of funds or property and the assumption of 8 administrative rights or responsibilities, with respect to the
9 outstanding obligations of the postal service. 10 (d) Mail addressed to the Canal Zone from or through 11 the continental United States may be routed by the United 12 States Postal Service to the military post offices of the 13 United States Forces in the Republic of Panama. Such mili14 tary post offices shall provide the required directory services 15 and shall accept such mail to the extent permitted under the 16 Panama Canal Treaty of 1977 and related agreements. The 17 Panama Canal Commission is authorized and directed to fur18 nish personnel, records and other services to said military 19 post offices to assure wherever appropriate the proper distri20 bution, rerouting, or return of said mail.-...: 21 (e)(1) The second sentence of section .403(a) of title 39 22 of the United States iCode* is am ended by striking out 23 "Except as provided in the Canal Zone Code, the" and in24 seating in lieu thereof "The";,
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1 (2) Section 3402(a) of title 39 of the United States Code 2 is amended by striking out "each post office in the Canal 3 Zone postal service" and inserting-in lieu-thereof "each mili4 tary post office of the United States Forces in the Republic of 5 Panama" and section 3402(b) of title 39 of the United States
6 Code is deleted.
7 (3) Section 3682(b)(5) of title 39 of the United States 8 Code is amended by striking the words "the Canal Zone
9 and".
10 (4) Section 3401(b) of title 39 of the United States Code 11 is amended by inserting the word "or" before the words "the 12 Virgin Islands" and by striking the words "or the Canal 13 Zone.".*
14 TITLE JY-COURTS AND RELATED FUNCTIONS 15 CONTINUATION OF CODE AND OTHER LAWS* 16 SEC. 401. (a) Except as otherwise provided in this Act, 17 the provisions of the Panama Canal Code, as amended, and 18 other laws applicable in the Canal Zone prior to the entry 19 into force of the Panama Canal Treaty' of 1977 by virtue of 20 the territorial jurisdiction of the United States in the Canal
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1 ty to regulate, any matter as to which the United States may, 2 not exercise jurisdiction under the Panama Canal Treaty of
3 1977 and related agreements.
4 JURISDICTION DURING TRANSITION PERIOD
5 SEC. 402. (a) The Congress of the United States finds 6 that Article XI of the Panama Canal Treaty of 1977 pre7. scribes certain special provisions governing the jurisdiction of 8 the United States in the ]Republic of Panama during a transi9 tion period of thirty months beginning upon the date the 10 Panama Canal Treaty of 1977 enters into force. 11 (b) Notwithstanding inconsistent provisions of the 12 Panama Canal Code or any other law, the jurisdiction of the 13 district court and magistrates' courts established pursuant to 14 title 3 of the Panama Canal Code shall be limited as provided 15 by Article XI of the Panama Canal Treaty of 1977. 16 (c) For the purposes of the exercise of the jurisdiction 17 described in subsection (b), the terms "United States citizen 18 employees," "members of the United States Forces," "civil19 ian component," and "dependents" shall be construed as
20 the are deie in the Paam Cana Trat of 197 and
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1 Balboa and Cristobal described in Annex B to that Agree2 ment, and (3) the Defense Sites and Areas of Military Co3 ordination described in Annex A to the Agreement in Imple4 mentation of Article IV of that Treaty.
5 DIVISIONS AND TERMS OF DISTRICT COURT
6 SEC. 403. (a) The United States District Court for the 7 District of the Canal Zone is authorized to conduct its affairs 8 at such places within the areas made available for the use of 9 the United States under, the Panama Canal Treaty of 1977 10 and related agreements, and at such times, as the district 11 Judge may designate by rule or order. 12 (b) Sections 2 and 3 of title 3 of the Panama Canal 13 Code are repealed.
14 TERM OF CERTAIN OFFICES 15 SEC. 404. Notwithstanding the provisions of sections 5, 16 41, 45, and 82 of title 3 of the Panama Canal Code, the term 17 of office of a district judge, magistrate, United States attor18 ney or United States marshal appointed after the date of en, 19 actment of this Act shall extend for a period of 30 months 20 beyond the date the Panama Canal Treaty of 1977 enters
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1 RESIDENCE REQUIREMENTS
2 SEC. 405. Sections 5(d), 7(d), 41(d), and 45(d) of title 3 3 of the Panama Canal Code, the second sentence of section 42 4 of that title, and the second sentence of section 82(c) of that 5 title, which require that certain court officials reside in the
6 Canal Zone, are repealed.
7 SPECIAL DISTRICT JUDGE
8 SEC. 406. (a) Section 6 of title 3 of the Panama Canal
9 Code is amended to read as follows: 10 " 6. Special district judge
11 "(a) The chief judge of the judicial circuit of which the 12 district court is a part may designate and assign a special 13 district judge to act when necessary: 14 "(1) during the absence of the district judge; 15 "(2) during the district judge's disability or dis16 qualification, because of sickness or otherwise, to dis17 charge his duties; or
18 "(3) when the office of district judge is vacant. 19 "(b) Each such designation and assignment by the chief 20 judge shall be made in accordance with chapter 13 of title 28
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1 and existing immediately preceding the date upon which the 2 Panama Canal Treaty of 1977 enters into force shall contin3 ue in operation for 30 months from that date unless discon4 tinued during that period as otherwise provided by this sec5 tion.
6 (b) During the period referred to in subsection (a), one 7 or both magistrates' courts, together with the positions of .8. magistrate and constable corresponding thereto, may be abol9 ished by the President or his designee if in his judgment the 10 workload is insufficient to warrant continuance of either or 11 both courts. If one of the courts is so abolished, the remain12 ing magistrate's court shall exercise the jurisdiction that oth13 erwise would have been exercised by the abolished court and 14 shall take custody of and administer all its records. 15 (c) If both magistrates' courts are abolished pursuant to 16 subsection (b), the following provisions shall thereafter apply: 17 (1) The district court shall exercise the jurisdic18 tion of the magistrates' courts. 19 (2) All records of the magistrates' courts shall be 20 deemed records of the district court.
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1 cable in the district court shall thereafter apply. All 2 other criminal actions shall be instituted in the district 3 court by the filing in each case of an information pur4 suant to chapter 213 of title 6 of the Panama Canal
5 Code.
6 (4) The requirement of and procedures for prelimi7 nary examinations under section,172 of title 3 and sec8 tions 3801 through 3806 of title 6 of the Panama
9 Canal Code shall not apply. 10 OATH 11 SEc. 408. Section 543 of title 3 of the Panama Canal 12 Code is amended to read as follows: 13 " 543. Oath
14 "Before receiving a certificate the applicant shall take 15 and subscribe in court an appropriate oath prescribed by the 16 district judge.".
17 TRANSITION AUTHORITY 18 SEC. 409. Except as expressly provided to the contrary 19 in this Act, in any other statute, in the Panama Canal Treaty 20 of 1977 and related agreements, or by Executive order, any
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1 SPECIAL IMMIGRANTS
2 SEC. 410. (a) Section 101(a)(27) of the Immigration and 3 Nationality Act (8 U.S.C. 1 101(a)(27)) relating to the defini4 tion of special immigrant, is amended5 (1) by striking out "or" at the end of subpara6 graph (C);
7 (2) by striking out the period at the end of sub8paragraph (D) and inserting in lieu thereof a semicolon;
9 and
10 (3) by inserting after subparagraph (D) new sub11 paragraphs (E) and (F) to read as follows: 12 "(E) an immigrant who is an employee of the 13 Panama Canal Company or Canal Zone Government, 14 who is resident in the Canal Zone on the effective date 15 of the exchange of instruments of ratification of the 16 Panama Canal Treaty of 1977, and who has performed. 17 faithful service for one year, or more, and his spouse 18 and children who accompany or follow to join him; or
19 "(F). an. immigrant, and his spouse and children 20who accompany or. follow to join him, who is a Pana-
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I or (ii) who, on the date of entry into force of the .2 Pan ama. Canal Treaty of 1977,. has been a faithful ema3 ployee of the United States Governmfient in. the: Canal 4 Zone (or former Canal Zone) for fifteen-years ormQme 5 and who subsequently is honorably retired from such
6 employment.".
.7 (b) Section 212(d) of such Act (8 U.S.C. 1182(d)), relat8 ing to waivers of conditions of inadmissability to the United 9 States, is amended by adding after paragraph (8) new para10 graphs (9) and (10) to read as follows: 11 (9) The provisions of paragraph (7) of subsection (a) 12 shall not be applicable to any alien who is seeking to enter 13 the United States as a special immigrant under subpara14 graphs (E) or (F) of section. 101(a)(27). 15 "(10): The provisions of paragraph (15) of subsection (a) 16 shall not be applicable to any alien who is seeking to enter 17 the United States as a special immigrant under subpara.18 graphs (E) or .(F) of section 101(a)(27) and who applies for. 19 immigration no later than thirty calendar months after the 20 date the: Panama Canal Treaty of 1977 enters into force." 21 PRISONS; PAROLE; PARDON 22 .SEC. 411. (a), Subsection. (c) of, s ection-:65,03 Q~f title 6,of 23: the.Panama Canal .Codeis .amended t6, read: as. fol!o~ws: 24 'N'() .Pursuant to the provisions of sec.tioan.5003 of title 25 .18 of. the J.UnitedStates Code, tlhle' Goye~rnor shall contract
48-366--79 5
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1 with the Attorney Geheral for the transfer to the custody of 2 the Attorney GQeneral of prisoners sentenced by the United. 3 States District Court for the District of the Canal Zone to:
4 terms of imprisonment in excess of one year.". S (b) Upon enitry.into force of thePanama Canal Treaty of
6 19777 (1) all. prisoners then imprisoned in United States 8 prisons pursuant to contracts entered into' under sub9 section, (c) of section 6503 of title 6 of the.Panama 10 Canal Code shall be committed to the custody of the 11 Attorney General as if' committed in accordance with 12 part III of title 18 of the United States Code; 13 (2) all persons convicted of offenses in the United 14- States District Cotiurt for .the District of the Canal 15: Zone, and sentenced to terms of imprisonment of one 16, year or less, shall be committed to the custody of the 17 Panama Canal' Commission; S8- (3) the Panama Canal Commission shall prescribe, 19 and from time to. time may amend, regulations. provid20 ing for the management of prisoners in the jails located 21 'in the. areas and installations made available for the 22' use of the United States pursuant to that Treaty, in23 cluding provisions for treatmefit, care, assignment for 24 work; discipline, and welfare;
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1 (4) sections 6501 through 6505 of title 6 :d the
2 Panama Canal Code are repealed; and
3 (5) chapter 355 of title 6 of the Pananma Canal
4 Code is repealed.
5 (c) After entry ,into force of the Panama C(inal Treaty of 6' 1977, all persofis convicted of offenses in the Unifed States 7 District Court for the District of the Canal Zone, and sen8 tenced to terms of imprisonment in excess- of one year, shall .9 be committed to the custody of the Attorney General pursu.10 ant to parts III and IV of title 18 of the United States ,Code. 11 TITLE V-MISCELLAlEOUS PROVISIONS 12 HEALTH DIRECTOR; HOSPITALS 13 SEC. 501. (a) In chapter 57 of title 5 of the' Panama 14 :Canal Code, references .to" "hospitals'", to the -"Health 15 Bureau", and to the "health directorr", shall be deemed to be, 16 respectively, to the hospitals operated by the United States 17 in the Republic. of Panama after the effective date, .t.o the 18 organizational unit operating such hospitals; and to the senior 19. official in charge of such hospitals. 20 -(b) In section 4784' of title 6, section 2 of title 7,. and 21 sections ,32, 35 through 38 of title 8. of the Panama Canal 22 Code, references to the health director shall be deemed to be 23 to the senior official in charge of the hospitabi operated, by 24 the United States in the Republic of P.anama after the effec25 tive date.
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1 DISINTEIRMENT, TRANSPORTATION, 'AND REINTERMENT OF
2 REMAINS
3 SEc. 502. (a) There are h ereby authorized to be appro4 .priated such suns as may be necessary to carry out the pur5 poses and provisions of reservation 3 to the Resolution of 6 Ratification of the Treaty Concerning the Permanent NeuL 7 trality and Operation of'the Panama. Canal, adopted by the 8 United States Senate on March 16, 1978, said sums to be 9 made available to those agencies that are directed and em10 powered by the President of the United.States to carry out 11 'such purposes and provisions. 12 (b) With regard to remains that are to be reinterred in 13 the United States, the United States will not bear the cost of 14 funeral home services, vaults, plots, or cryptsiunless other15 wiseprovided for by law.
16 EFFECTIVE DATE
1.7 SEc. 503. (a) Except as otherwise !provided in subsec18 ition (b) of this se'dtion, the provisions of this Act shall take 19 'effect on the effective date of the Panama Canal Treaty of 20 1977.
21 (b) Sections 231, 321, 322, 325, 326, 404, 410, 411, 22 and 502 of this Act shall become effective upon the date of .23 enactment of this Act.
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OPENING STATEMENT BY SENATOR JOHN C. STENNIS, CHAIRMAN
Chairman STENNIS. Members of the committee, and ladies and gentlemen, this is an open hearing and it is hoped to be a hearing where we will have quiet so that the witnesses can be heard.
This is a matter of importance. Now, I have waited before holding this hearing because last year we had the subject matter of the treaty and this year the House had implementation legislation.
I thought as a courtesy to them, as well as a help to us, it would be better for us to wait for their presentation of the matter until after they had held hearings and acted on it.
There is a lot of interest. It is not a foregone conclusion as to how this bill will fare here in the Senate.
It is important legislation, as I say, but it does come in following the treaty.
The Constitution provides that with reference to treaties other laws, too, but with reference to treaties that when duly ratified according to the terms of this instrument, meaning the Constitution, it shall be the supreme law of the land, and that means exactly what it says. No one could have any illusions as to think that that can be ignored. We have to move from there; and it is with full reservations as to how I may vote on all of these matters. We will have to have a plan for implementation of this treaty or modify or repeal the treaty by some lawful means.
I do not think we will have any great trouble. The facts are known generally. Everyone passed on it last year in an important vote.
I think the hearings should be complete. To the witnesses-it is important, what you are going to say. We appreciate the effort you have made to prepare yourself. We have one member whom I picked out and designated to make special preparation; that is Senator Levin, sitting here to my right. He has shown an enormous capacity for work, and I like the way he moves into it. He has worked on this matter.
While I am commenting on members, Senator Cannon is coming in. He contributed a great deal last year to getting the facts together about the treaty and I am pleased that he is here.
My lack of attendance here during all of the hearings is due solely to the fact that I have matters pending now on the floor in the supplemental appropriations bill, and I will just have to go and give that my personal attention. I am interested in this matter and urge all members who can stay to do so.
We have the wisdom of the Senate which put a limit on the authority of a major committee of the Senate, the subcommittees, and I find due respect to carry on our work, but did not have the authority to appoint another subcommittee. So I asked Senator Levin to make special preparation and be prepared to take a lead position on this bill, and he has done just that as in the case of the Senator from Nevada who did it in reference to tactical air.
When I leave, I am going to ask that Senator Levin be recognized as the one to take the lead. It does not diminish anyone else's responsibility, of course.
Secretary Duncan, I understand that you have some special duties to tend to?.
Mr. DuNrCAN. Yes, ,sir. I have another hearing.
Chairman STENNIS. Members of the committee, I have a brief opening statement and ask unanimous consent that it be inserted in the record at'this time.
[The prepared statement of Senator Stennis follows:]
PREPARED STATEMENT OF HON. JOHN C. STENNIS, CHAIRMAN
This morning the committee begins its hearings on 5. 1024, a bill to. implement the Panama Canal treaties. Many of the issues that we will be discussing during these two days are not new to the members of the Senate who were here last year, as there was a great deal of discussion during the treaty ratification debate about the costs of implementing the treaties and how that cost should be borne.
Some Senators, like myself, felt, on balance, that the Panama Canal treaties were unwise and voted against them. In my case, I was not convinced that the national security risks of giving up our control over the Canal were worth the benefits to be gained in our relationship with Panama. Nonetheless, our constitutional process was carried out to its fullest, and the treaties were eventually ratified. 'They are now the law of the land, and a solemn international obliga-* tion of the United States. Our committee has jurisdiction over legislation affecting the government and operation of the Panama Canal, and we must carry out our responsibility to fully and fairly implement these treaties.
In short, we must put the debate over the desirability of the treaties behind us, and consider how best to manage the transition to the treaty regime, to protect the interests of our citizens who work in Panama, and facilitate the continued smooth operation of the waterway itself.
This is complex legislation, and while we start with the bill put forward by the Administration, I feel certain that this committee will have some changes of its own to add, based on its accumulated experience in dealing with these issues over many years, and particularly during the last two. Because of the tremendous volume of work faced by the committee this Spring, I ask Senator Levin to take on the job of looking into this legislation, informing himself especially deeply on the issues, so that we could have some expert guidance on this complex matter. I am sure -that Senator Levin will have a number of questions for these witnesses, and I look forward to hearing from him.
This morning we welcome Deputy Secretary of State Warren Christopher, and Deputy Secretary of Defense Charles Duncan. They are accompanied by Ambassador David Popper, Secretary Vance's Special Representative for Panama Treaty Affairs, and by Assistant Secretary of the Army Michael Blumenfeld, whose office actually supervises the operations of the Panama Canal Company. These two gentlemen, as I understand it, have been heading up the groups in the Departments of State and Defense who have been doing a good deal of the actual planning for treaty implementation. We welcome all of you.
.Chairman STENNIS. The committee also has prepared statements of Senator Levin, Senator Tower, and Senator Thurmond, and I ask unanimous consent that 'they be inserted in the record at this time.
[The prepared statements of Senators Levin, Tower, and Thurmond follow:]
PREPARED STATEMENT OF SENATOR CARL LEviN
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gotiated with Panama, and the continued smooth operation of the Canal itself, a goal we all share. Having ratified the treaties in accordance with out constitutional processes, we now have the responsibility to implement them fully and fairly. That is a responsibility to ourselves, not just to Panama, because we must insure that the implementing legislation does not jeopardize any of our rights which are guaranteed and protected by the treaties as they were approved by the Senate.
I would like to briefly lay out for the members of the committee several important considerations which I believe should serve as our guide as we shape this legislation. First, we must seek to maintain the security of the Canal, thereby contributing to our own national security and prosperity. We have already begun to forge a new cooperative relationship in which the Panamanians will work with us to achieve that shared objective.
Second, we must be sensitive to the future well-being of the current employees of the Panama Canal Company, and of other Americans living and working in the Canal Zone. Many of these employees will be needed to continue the smooth operation of the Canal. We must treat them fairly in the implementation process, in recognition of the contributions they have made to the superb operation of the Canal over the years.. And we must act quickly, to enable the Panama. Canal Company to put in place the necessary groundwork for its new operating structure, with minimal disruption, and to allow our employees to have sufficient lead time to make thoughtful decisions about their futures.
Third, we must be mindful of the cost of implementation of these treaties. While we cannot burden the taxpayers with excessive or unnecessary costs, we must be as candid as possible about what the true costs will be. We should recognize that providing necessary services for the employees of the Commission and the Department of Defense, and maintaining an adequate military presence in Panama for the defense of the Canal, will entail expenses.
Finally, we must be mindful of the international consequences of our actions. We have voluntarily entered into two international obligations, and the Panamanians and others in the world community have the right to expect that we will abide by the letter and spirit of our treaty commitments. Perhaps more importantly, I know each of us expect that ourselves.
In our hearings today and tomorrow, we have tried to schedule testimony from witnesses representing a variety of perspectives on many of the issues surrounding implementation of these treaties.
Thank you, Mr. Chairman.
I would also like to submit the following attachment.
ADVANTAGES OF CORPORATE FORM
(With Examples)
This summary sets forth the advantages of corporate form for the Commisson and gives some specific examples of its strengths.
In spite of the many other changes to be wrought by the treaty, it appears certain that the basic objectives set by Congress for the Canal enterprise will remain unchanged. It is significant that these basic objectives are business objectives: that the enterprise continue to provide service to all shipping willing to pay the tolls, and that it continue to set tolls to cover all costs of operation. In addition, the treaty requires that the U.S. turn the Canal over to Panama at the end of 1999 in operating condition and free of liens and debts. This, too,
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that meeting Congressional spending goals would also result in improving the Commission's ability to meet Congressional business goals. In fact, rigid control through -appropriation funding would do away with the two major elements. that give the Company its financial strength: built-in financial discipline and incentives; and operational and financial flexibility.
It is not surprising that the corporate form, with its inherent self-sufficiency, should be so successfully compatible with the needs of the Canal enterprise. In the same way that the commercial corporate form tends to protect stockholders from liability, the government corporate form has permitted to Canal to operate at no cost to the United States taxpayer. Because the corporate entity cannot readily dip into its -stockholders' pockets, there are built-in incentives and a discipline that provide the best assurance that the entity will live within it, resources.
Corollary to this built-in mandate for self-sufficiency, and indispensable to it, is the flexibility inherent in the corporate form to respond to changing business conditions to optimize profit. This flexibility is especially vital in the operation of the Canal because of the changing conditions it faces on a daily basis. Because toll rates are, in the short term, essentially fixed, and the Canal has no control over the volume of traffic that appears for transit, the canal's opportunities for revenues are dependent upon daily traffic patterns. At the same time costs are subject to large swings occasioned by changes in numbers and configuration of transiting ships; accidents and earth slides in the waterway; and many unpredictable problems associated with maintaining equipment, much of which is very old.
Making 'a profit under these conditions requires a constant effort on the part of management to commit, conserve and reallocate resources to produce the best revenue-cost ratio under the given conditions. Without the flexibility of actionespecially the flexibility to commit additional resources or reallocate resources in order to handle unexpected traffic or other problems-the Canal would tend t(x operate less economically.
In contrast to the strengths of the corporate form there is, under funding through appropriations, neither the same degree of responsibility, nor the operational or financial flexibility, to try to improve on budgeted goals. Under an appropriated fund form, there is a temptation to place more emphasis on where and how money is spent than how well it is spent. To control spending, appropriations are normally made through a separate fund for each type of cost that it is desired to control. Even though opportunities arise to improve on budgeted goals, and it is certain that such opportunities will continue to arise frequently, additional costs cannot be incurred, nor transfers made from one fund to another, without specific authorization from Congress. If action by Congress is not timely, the opportunities to improve on budgeted goals could be lost. The significance of this is that the enterprise may not operate ias economically or efficiently.
As a comparison, the following are common examples of situations where the ability to commit additional funds or to reallocate resources or funds results in improving the Panama Canal Company's financial position:
1. Spending money to make money.-If there is an unexpected surge in traffic that will cause transit-related costs to exceed budgeted figures, additional funds are used to provide the service to the additional traffic, since the additional revenues from the transits will more than cover the additional costs. For example, the corporate type budget submitted by the Company for fiscal year 1978 projected $304.1 million in operating costs to handle 141.6 million PCC net tons of traffic and 'all supporting activities. An additional 16.0 million net tons of traffic actually transited the Canal requiring an additional $10.2 million in cost but generating revenues of approximately $18.1 million.
2. Spending money to ave rnoney.-In a recent accident in tbe Canal. a pa'ssenger ship suffered damages. Although no determination had been made that the Canal was responsible for the damages, it was decided that since damages, if assessed against the Canal1, would include the loss of revenue from scheduled future voyages, it would be prudaent to assure that repairs were accomplished as rapidly as possible. Since no U.S. shipyard could do the job rapidly, Company forces were used, and the ship returned to Galveston in time for a cruise it would otherwise have misseA. The amount spent to make the ren)airs was far exceeded by the potential additional liability; if the Company is subsequently found to heo not at fault for the accident, the repair cost will be paid by the owners of the ship.
3. Spending money to protect Cana7 eapacity.-Emergencies like earth slides in Gail lard Cut, malfunctioning valves in the locks, and damage to Canal facili-
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ties by transiting ships are not uncommon. Because they present an actual or potential threat to the ability of the Canal to handle traffic, emergency action is required to correct the problem. The costs are unanticipated, but still necessary to prevent the possible loss of traffic revenues.
4. Reducing costs as traffic decines.-If traffic declines below expected levels, variable costs related to the expected traffic can be eliminated. Although this is true also with 'appropriated funds, the following differences exist: because appropriated funds are available, it is difficult for labor to understand or accept reductions which invariably impact adversely on the workforce; common conception that underspending on a year's appropriation makes it more difficult to get funds for the following year. These pressures to spend contrast sharply with the corporate form's constant incentive to keep costs as low as possible.
In summary, the primary goals set by Congress for the Panama Canal Commission will in all probability be business goals. In pursuing these goals the Commission has to contend with !a variety of economic challenges, including operating emergencies. To operate most economically, the Commission should have the operational and financial flexibility to respond on a timely basis to opportunities to improve results or the need to reduce or reallocate costs. By assigning the responsibility for the success or failure of operations to a government corporation-and requiring that it live within its income-Congress can retain its present goal-oriented control over the Commission while taking advantage of the inherent strengths of the corporate form to protect the taxpayer from assuming any of the costs of operation of the Canal.
It is interesting to note that were the Commission to be given the form of an appropriated fund agency, it would still be necessary to adopt certain aspects of the corporate accounting structure in order to carry out the management of the enterprise. Since this would be necessary to provide the information for the determination of tolls and the computation of the contingent payment to Panama, it would represent a duplication of accounting effort. Lacking incentives and flexibility for management to act on the information, such a system may not provide the degree of economic performance that full operation under a corporate form could provide.
The viability of the Panama Canal Commission in the years to come is a matter for great concern. There is a point beyond which tolls cannot rise without driving away revenues, but there is no certainty how close present toll rates are to that point. What is certain is that the additional financial burdens placed upon the Commission by the treaty will bring toll rates nearer to that point of diminishing returns, and there will be less margin for error and greater need to operate at maximum economic efficiency. As set forth here, the ability of the corporate form to meet and make the best of changing economic conditions appears to be a better guarantee of viability than is likely to be achieved under the appropriated fund format.
As a final point, it should be noted that the current language of H.R. 111 does provide the Commission with some flexibility through limited access to an emergency fund. This is a substantial improvement over the appropriated fund agency concept but does not afford all of the advantages cited for the corporate form.
PREPARED STATEMENT OF SENATOR JOHN TOWER
Mr. Chairman. the purpose of our hearings today is to begin consideration of S. 1024, the Administration bill to implement the Panama Canal Treaties approved by the Senate last year.
As the members know, the House last week passed its own version of this legislation in II.R. 111. Chief among these differences are the provisions for operation of the Canal by a noncorporate agency instead of continuing the present Company uder another name; the return to the requirement that revenues of the C'inal ,be paid into the U.S. Treasury and expenditures be subject to annual appropriations ; the centralization of authority in the Secretary of Defense, and the retirement for confirmation by the Senate of key presidential appointments.
The House bill also provides that at least three of the President's appointees to the Supervisory Board have experience in maritime matters. This provision reflects the concern in Congress as to the adverse impact on 17.5. ports and consumers likely to result when tolls are increased to support substantial annual payments to Panama.
Mr. Chairman, I trust our committee will evaluate the House amendments carefully as many appear to have considerable merit. Further, I believe this Corn-
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mittee should give special attention to the defense aspects of the Treaty, as the continued operation of this Canal is vital to our national security interests. Thank you.
PREPARED STATEMENT OF SENATOR STROM THURMOND
Mr. Chairman: On October 1 of this year, U.S. control and sovereignty over what is now known as the Panama Canal Zone will be transferred to the Republic of Panama. From that date until the year 2000, the United States will operate the Canal based upon the provisions of the 1977 treaties as implemented in the, legislation now being developed in the Congress.
As an opponent of these treaties, I cannot help but look back upon the testimony given us last year by the Administration. Secretary of State Cyrus Vance told the Congress "the treaties require no new appropriations, nor do they add to the burden of the American taxpayer." Deputy Secretary of State Warren Christopher, appearing before us today, also testified last year that "the treaties will not require any appropriations from the American taxpayer." It is inconceivable to me how the State Department could have been so naive on these costs. Just prior to our hearings in 1978, the State Department finally admitted there would be $3,50 million in "certain expenses." Just prior to the House hearings in March of this year these costs requiring direct appropriations were revised by the State Department to $870 million. This episode represents the poorest performance before Congress in cost estimating in my memory. The end result of these bad estimates was that the Senate last year ratified these treaties without fully realizing the direct or indirect costs to the American people.
Of course these costs were those requiring appropriations from the U.S. Treasury and do not include $2.1 billion in Canal revenues which will be paid to Panama, the value of the Canal and losses of revenue to the United States. The House Merchant Marine and Fisheries Committee of the House has estimated these total costs at $4.2 billion.
Mr. Chairman, on top of these huge costs I am concerned that in the mid-19,80's additional appropriated funds will be needed to keep the Canal in operation. Previous testimony by the Governor of the Canal Zone and the Comptroller General have indicated this is a strong possibility.
In addition, it is possible that the increased tolls resulting from the Treaty will drive shippers to the land bridge. If this happens, the Atlantic and Gulf Coast ports which serve this Panama Canal traffic will be severely damaged and the United States will have to pay to keep the Canal open for defense purposes.
Mr. Chairman, I view these hearings on the implementing legislation as an opportunity to salvage some elements of our national interest in this matter. The American people resent their hard-earned tax dollars being skimmed away as the result of poorly negotiated treaties. Therefore, I trust our Committee will approach this legislation from the standpoint of protecting what interests we have remaining in the Panama Canal.
Chairman STENNIS. If there is no objection, we will proceed now to hear the Deputy Secretary of Defense, Mr. Duncan.
Do you have a prepared statement, sir?
Mr. DUNCAN. Yes, I do.
Chairman STENNIS. If you ask to have it put in the record, I think we will agree to it, and you can summarize if you wish, for the sake of time. ..
So you proceed in your own way.
STATEMENT f CHARLES W. DUNCAN, YR., DEPUTY SECRETARY
OF DEFENSE, ACCOMPANIED BY GEN. WELBORN DOLVIN,
DEPARTMENT OF DEFENSE TREATY REPRESENTATIVE
Mr. DuNCAN. Thank you, Mr. Chairman. I am very pleased to be here this morning to discuss with you the implementing legislation needed for the Panama Canal Treaty of 1977.
My prepared remarks will cover four basic areas: The Department of Defense responsibilities under the treaty; the implementing
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costs issue; the consequences to the Department -of Defense of legislation that does not support both the letter and spirit of the treaty; and certain of the provisions in the parallel bill passed by the House on June 21.
The Department of Defense supported the treaties as approved and ratified by the United States and Panama.. From the outset, the Joint Chiefs of Staff stated that the canal was of military importance and that it gave us great flexibility in transferring our forces from one ocean to the other. It is especially valuable in its application to our logistical and amphibious shipping. The fundamental interest of the Joint Chiefs of Staff in the canal is its continued availability for our naval ships and ships. of commerce.
Our emphasis has always been placed on the free and unrestricted use of the canal, rather than on ownership of or sovereignty over the zone. This led the Joint Chiefs of Staff to evaluate the situation in Panama and to conclude that the best alternative to the continued use of the canalI in both peace and war, was a new treaty relationship with Panama that would meet our security interests in the canal and provide the basis for active cooperation and support for the canal's continued operation.
The Department of Defense considers that these treaties meet these requirements by insuring U.S. rights for the operation and defense of the canal for the next 21 years. This allows us time to train key Panamanian personnel and integrate them into the management and defense of the canal so that Panama can assume its responsibility for its stewardship in the year 2000 without any degradation in canal efficiency. The Panama Canal Treaty provides to Panama a significant, tangible stakce from canal tolls in its continuing and efficient operation.
This is the Department of Defense view of the treaties and the rationale for our support of them. It is now our hope that the Congress will pass legislation that will enable us to carry out our responsibility to operate and defend the canal in a cooperative environment. We would also hope that the final legislative package will provide the meaningful role for Panama that is mandated in the treaty ratified by both governments.
The fact of the matter is that the new treaties have been the law of the land since April 1, this year, when the instruments of ratification became effective in accordance with the Brooke reservation. The treaties will inexorably enter into force on October 1, this year. With the President's assignment to the Secretary of Defense of the responsibility for the operation as well as the defense of the Panama Canal,
the epatmet o Deens cosidrs hatsuportve nd imeylgis
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DOD necessarily will be operating the health and educational services for all U.S. citizens and their dependents assigned to U.S. Federal agencies in Panama, principally the Commission and the military commands.
We will be providing many other supporting services to a DOD community enlarged by the transfer of about 2,600 employees from the company and Canal zone government. Additionally, during the initial 5 years of the treaty, DOD will have to expand its postal, commissary, and post exchange facilities in order to accommodate the U.S. employees of the Commission.
All of these activities, which impact so dramatically on the quality of life for the official American community in Panama, require timely action by the Congress on the bill you are now considering.
These essential services for the 30,000 Americans who will remain in Panama will require funds appropriated by the Congress. The appropriations request for those funds has been submitted as a part of the President's budget for fiscal year 1980 in addition to supplemental requests for fiscal year 1979. The budget for these functions is austere and one for which I urge your full support.
The costs of these activities has, unfortunately, been used as a political diversion to the requirements for the legislation needed by DOD to manage the canal. The issue has also become clouded with exaggerated assertions of treaty costs and what they should comprise. I would like to review the facts and clarify the record.
Immediately following the signing of the new treaties in September 1977, many Americans were led to believe that taxpayers' dollars were to be appropriated to meet the treaty payments to Panama. The answer then, and the answer now, is that all treaty payments to Panama will come from canal tolls.
All initial administration statements concerning costs were intended within that context. Later, at the beginning of the Senate's debate on the treaties, we were asked by the chairman of this committee to provide an estimate of the total appropriated costs of the Panama Canal Treaty.
Although there was no approved treaty, no legislation and no treatyrelated budget, we attempted to calculate what those 20-year costs might be. The $350 million estimate, submitted to the Senate on February 10, 1978, was based on the best data available at that time.
Following the advice and consent given to the treaties by the Senate in April 1978, we began intensive planning in all areas of related DOD responsibilities. In March of this year, an updated estiimate of treatyrelated appropriated funds was submitted to the House Merchant Marine and Fisheries Committee. This estimate, predicated on the passage of the administration's proposed legislation, was based on the fiscal year 1980 budget already submitted to the Congress, the fiscal year 1979 supplemental requests, the 5-year DOD programing documents, and a high sided assumption that the U.S. presence in Panama would remain unchanged for 20 years.
We indicated that the outside limit of these costs might be $879 million. We futly expect that the total funds that would likely be requested from the Congress for these necessary tasks will be far less than this worst cas e estimate. It particularly should be, noted th'at none of these funds are to be paid to the Government of Panama. They will be used to support the continued American presence related to the canal's operation and defense% relocation of the remains of U.S. eiti-
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zens, preferential retirement arrangements, a one-time retroactive retirement fund payment for several hundred nonappropriated fund employees, certain State Department treaty expenses, and a required reserve for the foreign military sales credit program.
With your permission, I would like at this time to submit our cost estimate for the record.
[The information follows:]
Net additional cost requirements to the U.S. Government, payable from the
general fund of the Treasury through the life of the treaty
[Dollars in millions]
DOD implementation requirements: Amount
Fiscal year 1979-84 --------------------------------------------277. 0
Fiscal year 1985-1st quarter, fiscal year 2000 --------------------- 480. 0
Personnel requirements:
Preferential retirement arrangements ----------------------------205.0
Potential liability for interest on retirement benefits transferred-.... 2.0 Nonappropriated fund employees' retirement ----------------------- 2. 0
Other requirements:
Consular services ------------------------------------------------3. 7
Expenses of joint committees -------------------------------------3. 8
Relocation of remains of U.S. citizens ----------------------------- 3.2
Foreign military sales reserve ------------------------------------ 5.0
Gross amount of additional appropriated funds (fiscal year 197999) ------------------------------------------------------- 981. 7
Less:
Annuity payments to Panama ------------------------------- (36. 0)
Operational cost of air navigation control and facilities ------------ (75.0)
Net amount of additional appropriated funds (fiscal year 1979'-99) 870. 7
Early retirement estimate is costed over a period of 30 years.
DOD TREATY IMPLEMENTATION COST ESTIMATES
The Department of Defense has estimated that for the fiscal year 1979-84 period an additional net $277 million would be required:
Fiscal year1979 1980 1981 1982 1983 1984 1979-84
Base operations - 3.8 16.5 16.6 16.6 16.6 16.6 86.7
Commissary operations 2-.4 3.4 1.1 1.1 .7 .7 7.4 Port operations_ -.1 .9 .9 .9 .9 .9 4. 6 Communications--------------------- 1.6 .8 .5 .5 .5 .5 4.4
Disposal of remains--- .1 .2 .2 .1 .1 .1 .8 Criminal ilve3stigation-. 1 .1 .1 .1 .1 .1 .6 Medical operations 3-_- .6 14.6 16' 3 16.7 3.5 3.8 55.5 Postal ope.ations- -- - 5 1. 5 1.4 1.3 1.3 1.3 7.3
School system 4-6.0 6.0 6. 0 6.0 6.0 30.0 Military pay-3.5 3.5 3.5 3.5 3.5 17.5 Military construction 3 ___- 40. 6 6. 0 13.6 12.2 .5-------72.9
Equipment procurement 6-- -- 10. 0 6. 6 2.4 2.8 .8 22.6
Less credits (hospital operations)7---------(7. 5) (7. 5) (6. 7) (5. 8) (5. 8) (33. 3)
Total------------47. 8 56.0 59. 3 54. 7 30. 7 28. 5 277. 0
1The term 'base operations" includes support or housekeeping activities, such as supply and maintenance, transp)ortation, property repair and maintenance, and operation of utility plants and systems. 2Commissary patrons currently number 26,000. The number is expected to rise to 35,000 on Oct. 1, 1979, and not to exceed that level during the 5-year period.
3Medical population to be served is estimated at 88,500 as of Oct. 1, 1979, dropping to 44,000 by Apr. 1, 1982, and remaining at that level for the remainder of the period.
4 The population of the DOD school system is not expected to vary significantly during this period. All military construction results from relocation of military units. .
6 Initial and replacement equipment related to functions transferred from the Panama Canal Company; e.g., cargo handling equipment, administrative vehicles, communications and hospital equipment.
7 Revenue gathered as a result of medical1 care provided persons authorized to receive such care, but required to pay for it at established r tes. These amounts exclude that portion of the revenues returned to the 0. & M., Army appropriation, arid inclu, only those amounts return ned to the military personnel, Army appropriation and to miscellaneous receipts, Treasury account.
Source: Department of Defense.
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The Department of Defense has projected its appropriations' for- the p6rlfod beginning with FY 1985 and running through the first quarter of FY 2000 on a straight-line basis, i.e. on the basis of zero change from the FY 1984 level. For this purpose, the $28.5 million FY 1984 figure has been increased to $30 million, to include a margin for possible replacement of capital items and urgent military construction requirements. Moreover, the expenditure period has been calculated at 16 years rather than 151/4 years. On this basis, the Department of Defense estimates that its net additional requirements arising from the Treaty will be $480 million for the post-PY 1984 period. It should be emphasized that this figure is highly speculative and represents, in terms of constant dollars, maximum Defense costs for the period.
Statements by the Joint Chiefs of Staff and the Commander in Chief, U.S. Southern Command, indicate that, although there are no present plans to draw down the existing military forces in Panama, factors bearing on this issue will be reviewed periodically by the Department of Defense. It is unlikely that the
-entire present Defense community in Panama would remain through 1999.
PERSONNEL REQUIREMENTS
1. EARLY RETIREMENT BENEFITS
Article X (9) of the Treaty provides that the United States will seek special legislation for a liberalized ear y retirement program. This commitment is implemented by Sections 325 and 326 of H.R. 171-6. The passage of the legislation would increase the statutory liability of the Civil Service Retirement System by $205 million. In accordance with Section 8348(f) Title 5 U.S. Code, this liability would be amortized by annual appropriations over a thirty-year period of $12.7 million each.
The cost estimate of $150 million made by the Civil Service Commission in early 1978 did not include the effect of the 1978 pay increase or the cost of the liberalized benefits for Panama Canal Company and Canal Zone Government employees (mainly in health and educational facilities) who transfer to DOD because of their duties.
The details of the current estimate by the Office of Personnel Management (OPM) are contained in the following table estimated on a "static" basis:
A. Cost for employees who remain after October 1, 1979:
1. Number remaining -------------------------------------- 10,093
2. Average salary ------------------------------------------ $13 000
3. Total payroll (1) X (2) (million) ------------------------ $131:
4. Unfunded liability generated per dollar payroll ------------ $1.35
5. Increase in liability (3) X (4) (million) ------------------ $177
B. Cost for employees who retire immediately:
1. Estimated number retiring (3 times normal annual rate) --- 19500 2. Average salary ------------------------------------------ $13,000
3. Total payroll (1) X (2) (million) ------------------------ $20
4. Unfunded liability generated per dollar payroll ------------ $1.315. Increase in liability (3) X (4) (million) ------------------ $26
C. Law enforcement officers:
:1. Estimated number retiring immediately ------------------- 200
2. Average service (years) --------------------------------- 10
3. Increase in liability (million) ---------------------------- $1.3
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2. TRANSFER OF RETIREMENT BENEFITS
Article VIII (3) (c) of the Agreement in Implementation of Article III of the Treaty provides for the transfer to the Social Security System of Panama of funds equal to the amount of employee/employer contributions held for certain Panama Canal Company/Canal Zone Government employees who become employed by Panama as a result of the Treaty. This transfer is at the election of the employee. It is difficult to estimate the cost of this provision until it is known exactly how many employees are involved and how many will elect to make a transfer of their retirement contributions to the Panamanian Social Security System. It has been OPM experience that employees separated by a reduction in force, who lack the years of service for early retirement, generally request a refund of their contribution.
OPM has estimated that, if 300 employees elected to transfer their contributions, the cost of these transfers to the Social Security System, including U.S. Government matching funds, would not be more than $1-2 million. This is not a net incremental cost to the Treasury, since the transfer would be financed from contributions already made to the Civil Service Retirement Fund. Should interest on the employer/employee contributions be paid, the cost to the Treasury
would be $1-2 million.
3. NON-APPROPRIATED FUND EMPLOYEES
Annex C of the Agreement in Implementation of Article IV of the Treaty provides that non-U.S. employees who are not presently covered by U.S. Civil Service retirement, or employees paid by U.S. non-appropriated fund instrumentalities, shall be covered by Panamanian Social Security, with contributions paid by the insured and the employer according to the rates established by the Social Security laws of Panama. The Department of Defense budget will include a one-time request for $1.5-2 million to cover unfunded retroactive retirement annuities for non-appropriated fund employees.
4. CANAL PERSONNEL TRANSITION COSTS
The Panama Canal Company is self-financing and is required to reimburse the U.S. Treasury from Canal revenues for that portion of the appropriations for the Canal Zone Government which is not recovered from other federal agencies. Because of this reimbursement, there will be no net impact on the federal budget as a result of the supplemental requests described below. These costs are included in the interest of completeness.
As a result of the 1977 Treaty, the Panama Canal Company and the Canal Zone Government will cease operations at the end of FY 79. In the course of phasing out their activities, some one-time personnel-related expenses will arise from the Company/Government. Separated United States Government employees will receive lump-sum payments for their unused leave. Such leave is funded for the Company but is not funded for the Canal Zone Government, an appropriated fund agency. An appropriation of $1,930,000 has been requested for commuted leave payments to Canal Zone Government employees who will be terminated by the end of FY 79.
In addition, under the terms of their employment with the Company or Government, persons who were recruited to go to Panama to work for these agencies are entitled to have the cost of their return, including the movement of household goods and vehicles, paid by these agencies. These repatriation costs will amount to $1,301,000 for the Canal Zone Government and $1,672,000 for the Canal Company.
Finally, there will be some turnover among skilled employees of the Canal operation. This will lead to recruitment costs for the Canal Company of $165,000 beyond the amount identified in its FY 79 budget.
In sum, the aforementioned items will require an FY 79 supplemental appropriation of $3,231,000 for the Canal Zone Government and an increase of $1,837,000 in the limitation on general and administrative expenses of the Panama Canal Company Fund.
OTHER INCREMENTAL COSTS
1. Consular requirements.-As a result of the Treaty, the U.S. Embassy in Panama will assume a number of consular-type services previously performed
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by the Canal Zone Government. The thousands of U.S. citizens now living in the Canal Zone will, after October 1, 1979, be residing and working in Panama. They will thus require passports, citizenship services, welfare and protection support. To cope with this increased workload, the consular staff will be iicreased by two U.S. officers and eight local employees at entry into force of the Treaty. Over the life of the Treaty, the increased costs will be approximately $3.7 million.
2. Joint committees. The U.S. will need to meet certain expenses for its participation in two bilateral groups established by the Treaty, the Consultative Committee and the Joint Commission on the Environment. These expenses will be included in the Department of State budget. The estimate for personnel compensation and travel for U.S. members of the Consultative Committee is approximately $17,0009 per year and that for the Joint Commission, approximately $177,300 per year.
3. Relocation of remains.-$1.7 million is included in the FY 1979 supplemental request for the Canal Zone Government, to carry out the relocation work required by the Senate Reservation to the Treaty concerning the Permanent Neutrality and Operation of the Panama Canal. Since this requirement is designed to establish a permanent American cemetery in Panama and does not relate to operation of the Panama Canal, we have requested that this expense be met from the General Fund of the Treasury. Additionally, an estimated $1.5 million may be required in the DOD budget to cover the cost of transporting the remains of U.S. citizens from Corozal Cemetery to the continental United States, in accordance with the Senate Reservation.
4. Foreign military sales reserv'e.-Finally, there is a program for economic and military cooperation with Panama totalling $345 million. This program, which is from the Treaty, consists entirely of loans, guarantees and credits. It includes issuance of repayment guarantees under the Foreign Military Sales Program not to exceed $50 million over a ten-year period. Like the other parts of the program, this portion is not a grant to Panama and is not financed by the American taxpayer. Appropriations would be required only to cover ten percent of the annual program in the form of deposits in a special reserve account, as is the case with all such military credit sales. The maximum amount required for this purpose will be $5 million.
Mr. DUNCAN. The so-called price tags widely disseminated during the past 6 months and which range from $3 to $20 billion are illusory. They would lead the uninformed to believe that billions of dollars will be taken from the taxpayers' pocket during the next 20 years and spread among the Panamanians.
Nothing, including the levels of these hypothetical costs, could be further from the truth. The legislation submitted for your consideration is designed to enable the DOD, and hence, the United States to manage the canal throughout this century and to provide essential services to our dedicated canal employees and military forces who will remain in Panama. The related appropriations requests have been designed to support these objectives.
There are more than 30.000 Americans, civilian and military, in Panama who await your decision on this legislation. The military complement is transitory; that is, they are assigned for 3 or 4 years and are replaced Iby others with the same skills and training.
Furthermore, they have no choice in going there. The U.S. canal work force, on the other hand, arrived in Panama under an established set of ground rules and with the understanding that a lifetime career, rather than a temporary job, awaited them. The career remains but the ground rules have been changed as a result of a foreign policy decision made in accordance with our constitutional processes.
Chairman STENNIS. Let me interrupt for just a. minute. Some of our members here, I know, have only a limited time and I always like for every member to have a chance to ask questions of any witness,.
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especially a highly important witness like you. If yott do not mnc,, let's suspend here and let me give them a chance.
Let me repeat for those who have come in, the hearing on this legislation was deliberately held up by your chairman, awaiting hearings and disposition of the matter in the House.
Now that has happened and we will hear the testimony on this bill. I consider it important. In the meantime, I had asked Senator Levin to make a special effort to prepare himself to coordinate this matter, and he has worked on it considerably.
I am going to ask him to proceed for that purpose, being without the authority to appoint another subcommittee of our committee. The, Chair considers this highly important legislation.
I am going to have to excuse myself in a few minutes to go to thefloor where we have matters that we have passed on in the supplemental appropriations bill for the Department of Defense and otherdepartments and I will come back just as soon as I can.
I know that our hearings will proceed in the usual way and to the, accommodation of the membership as much as we can.
Mr. Sullivan, our staff director and John Roberts, general counsel of' our committee, as you know, have made preparation here. John Roberts made special preparation and you can certainly ca.ll on him.
I ask unanimous consent that certain questions that he prepared for the committee be inserted into the record for the attention of the witnesses and a followup answer within the week. If you need more time, we will extend it.
Gentlemen, what is your pleasure now? Senator Cannon, did you, wish to ask questions?
Senator CANNON. I will have to leave.
Chairman STENNIS. I already expressed my pleasure that you could come, and I hope you will come back.
Gentlemen, we will give this the attention it deserves. We want to. make this record complete and we will be meeting again this week.
Is there anyone who wishes recognition while the Deputy Secretaryof Defense is on the stand?
Senator Byrd?
Senator BY-D. Mr. Chairman, I just want to comment on your earlierstatement about" the witnesses. I notice that all the witnesses have leng-th.y statements. Now, that is fine, but that means less time forquestioning.
We have vitally important legislation on the floor of the Senate today. I would hope that the witnesses would be brief, submit theirfull report for the record, but give the members of the committee an opportunity for questioning.
Chairman STENNIS. I applaud your statement, sir. We ,have got to, move along. We are spread out too thin. We have to get this all on the record. Then everyone can examine it and make such moves thereon as they see fit.
Senator BYRD. We are going into all this ancient history. I am speaking now not necessarily of Secretary Duncan, but we will not have any time for questions. Many of us have to be on the floor the Chairman does.
Chairman STNIS. They will understand.
4 8-366---79 6
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Chairman STENNIS. All right, gentlemen. If you will excuse me now. If you should feel that I should be here, just send for me.
Mr. DUNCAN. Let me just summarize two points in my summary. I had four or five major points. Maybe I will touch very quickly on the two most important in my mind.
The first concerns whether we should have a Government corporation or an appropriated funds agency. I have a very strong personal 'view that we should have a Government corporation and not an appropriated funds agency.
The, second point I would like to make concerns sections 101 and 102 of H.R. 111. The House bill states that the Secretary of Defense shall direct the Panama Canal Commission and the supervisory board. I think that goes beyond the spirit of the treaty. I think that with the majority of the board, we have all the direction we need. I would make just those two final points, then open myself for questions.
Chairman STENNIS. Senator Goldwater, do you have any questions at this time?
Senator GOLDWATER. I have no questions.
Chairman STENNIS. Are there any questions over here?
Senator Huirti y. Not at this time.
Chairman STENNIS. Senator Exon?
Senator ExoN. Yes. I have a short statement, Mr. Chairman, and then I have a question or two.
Mr. Chairman, the subject of the ratification of the Panama Canal treaties tore at the fabric of our political society causing deep division last year.
Although I was not a member of the Senate at the time and, therefore, not privileged to all of the hearings and debate, I am' confident that, had I been here, my vote would have been against ratification.
However, the decision was made in the U.S. Senate. Therefore it seems to me that, realistically speaking, under our system of government, all of us in the United States must recognize the fact that the 'treaty was ratified. Therefore, the hearing that we are launching into this morning in the U.S. Senate has to do with the funding mechanism as to how the treaty is going to be implemented; whether those of us now in the U.S. Senate feel that that treaty should have been ratified in the initial instance or not.
Therefore, it is going to be my concern as Senator to make sure that any funds which are appropriated through a corporation, as you referred to, Mr. Duncan, are kept at the very minimum. I hope that during the testimony today and the testimony that will follow, possibly we can get into the matter as to why it is that the revenue from the Panama Treaty itself cannot be used, or should not be used, to pay some of the expenses that the U.S. citizen has been subject to for a long, :long time in running the Panama Canal.
I have a specific question, since you brought it up. Would you elaborate on the 'statement you just made? I understood that y~u were very much in favor of a GoVernment corporation as opposed to an appropriated funds agency. I refer to the fact that if, indeed, we go the Government corporation route that the Congress of the United States may be giving up some of the control that it might have on taxpayers' funds that could be used during the period between now and when we formally turn over the canal in the year 2000, I believe.
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Mr. DUNCAN. The Government corporation was established-I be.. lieve the Panama Canal Commission began operation under that format-in fiscal year 1951 and consequent legislation passed in 1950. During that period of time, I think the canal has operated very well. It has paid several hundred millions of dollars back to the U.S. Government in the form of interest. It has made a loan repayment, if I recall correctly, in the amount of $40 million.
In essence, it has been operated as a business. It is known that it had to meet its expenses from revenues. I think that has been a very good discipline to organize that kind of operation in. It has worked very successfully for a period of 39 years and I think that it would argueat least I would argLe-that it would be a very effective mechanism for the future. Insofar as congressional control is concerned, you still have your audits. You still have all of your annual appropriations process.
But I think that the flexibility and the management discipline inherent in the Government corporation as opposed to an appropriated funds agency where there is not quite the incentive to save money, to reduce costs in order to have to operate within revenues, is a very good discipline and I would recommend very strongly that it be perpetuated by the Congress.
Senator ExoN. Maybe I do not understand, Mr. Duncan. You have made the point, I think-although I have not read all of your testimony-that essentially, the money we are going to be called on to appropriate is for the benefit of the American nationals that are in the canal at this time. Is that a fair assumption?
Mr. DUNCAN. Right. That would be the money that we are talking about. That is the $870-odd million that I mentioned earlier.
Senator ExoN. Talking about $870 million, I am sure you followed the debate in the U.S. Senate very extensively. It was the general consensus, I believe, that the $870 million would be the amount of money necessary to be appropriated over the years by the Congress to implement the treaty. Is that correct?
Mr. DUNCAN. Right. Between now and the year 2000. That is predicated, of course, on a lot of assumptions. It is very hard to make precise figures when you are looking at a total of 20 years.
Senator ExoN. It would be my hope that out of this committee, or on the floor of the U.S. Senate, we might be able to tie down very precisely-or as precisely as possible-an exact figure. Because certainly those of us who have made studies of Government operations in the past find that many programs that have been started out on a rather small dollar figure multiply by 2 or 3 or 4 or 10 times before the full implementation is actually made.
Do you think it would be possible for the U.S. Senate, recognizing that we cannot bind future Senates, to set some kind of a goal or a limit early as we start the funding process for the implementation of the treaty?.
Mr. DuNCcAN. I think that would be difficult. There are too many unknowns. Let me elaborate for a moment, if I could.
Of the total of $870 million, if I recall correctly, $750 million is the Department of Defense. Of that $750 million, we are assuming about $30 million a year for the next 16 years from 1984 to the year 2000 at a flat rate of $30 million a year. That assumes there is no reduction of
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forces at the end of the treaty. That assuines a constant, flat, U.S. effort in the Panama area.
Whether that will happen or not, I do not know. I do not know whether the threat is going to increase or recede. I think to make a projection today as to what our costs are going to be for a period of 21 years would be a very, very difficult thing to do. I think that the $200-some-odd million that we have forecast for the next 5 years, that is a reasonably firm estimate. I think what is not firm is the $30 million a year for 16 years; the $4-80 million, which is, by far, the biggest part of the $870 million I referred to.
I also would make one other point, if I could, and that is we need the Panama Canal and we stipulated that it is an important national security asset. It is important if it is open to keep it open. We think that now and in the future we will probably continue to think that we need a military presence there.
That military presence has never been charged to the Panama Canal Commission. That is something the U.S. Government has always funded.
Senator EXON. To follow up, Mr. Chairman, on that point, earlier in the Armed Services Committee we had a recommendation from one of the services-I do not remember which-for a figure in the area of $20 to $30 million which they wanted in the 1980 fiscal budget for the construction of some type of facility so we would transfer some of our Armed Forces from their present facility to this new facility.
Can you, for the record, clarify what that might have been? Do you know?
Mr. DUNCAN. As I recall there are four major base complexes which include 22 military reservations. During the first 5 years of the treaty, we would be transferring parts of three of those military bases to the Government of Panama, thus necessitating the transfer of other U.S. facilities to other U.S. controlled bases.
We will make our own judgment in the intervening years betwe en now and the year 2000 as to the rate and the pace and the need to turn over any other additional bases or facilties.
Senator ExoN. When we get down to the bottom line here, we are then proposing to construct some facilities to implement the treaty, is that right? To make certain changes?
Mr. DuN-CAN. Right. Where we take some of our facilities pursuant to the treaty and the lengthy negotiations that led up to it, where we have agreed to move them from here to there, we have to have facilities for them. That is a -art of the $250-some million.
Senator ExoN. That will be a cost to the taxpayers of course.
Mr. DUJNCAN. Yes.
Senator ExoN. Those facilities will be fairly new, built in the last 2 0 years. Do we also give that to Panama when we leave in the year 2000 ?
Mr. DUNCAN. Those will be turned over to the Government of Panama.
Senator Exox. It is safe to assume, is it not, that, all of the money which will be appropriated will go to the American civilians that are there now. In fact, we are going to be constructing some facilities. and When we leave here in the yecar 2000, we will be turning over those
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facilities without pay, without being reimbursed in some fashion, by the Government of Panama.
Mr. DUNCAN. Right. That is at the then-residual value. I do not know what that would be, but I would say if you are going to maintain a military presence we now have on the order of magnitude of 9,300 military there, not including dependents.
If you are going to keep them there, you have to give them the resources and the housing and the other things you have to do all over the world where we have a military presence. We would like not to have to spend this money, but if you are contemplating the need to, keep a military presence in an area of the world for 20 to 21 years, it is necessary to have the facilities and the resources and the capabilities to take care of them and that is what we contemplate doing, in as austere a manner as possible.
Senator ExoN. The military presence there is at the expense of the American taxpayer.
Mr. DUNCAN. Yes, as it has been.
Senator LEVIN. We are trying to follow a 10-minute rule here.
Senator ExoN. Thank you, Mr. Chairman.
Senator ILvIN. Senator Goldwater?
Senator GOLDWATER. NO questions.
Senator LEVIN. Senator Byrd?
Senator BYRD. Thank you, Mr. Chairman.
Would you break down the $870 million that it will cost?
Mr. DuxcAN. Yes, sir.
The $277 million I talked about earlier, the Department of Defense budget from fiscal years 1979 to 1984.
Senator BYRD. How is it spent? What is it for?
Mr. DUNCAN. Base operations. I will give it to you very quickly, and I will submit more detail for the record. Essentially, base operations, $86.7 million; commissary operations, $7.4 million; fort operations, 84.6 million; communications, $4.6 million; $800,000, disposal of remains: $600,000, criminal investigations; $55.5 million, medical operations; $7.3 million, postal operations; $30 million, school system; $17.5 million, military pay; $72.9 million, military construction; $22.6 million, equipment procurement; and a credit of $33.3 million on hospital operations, for a total of $277 million.
I have submitted that for the record as a part of my statement.
Senator BYRD. $277 million out of $870 million. Where does the other $600 million come from?
Mr. DUNCAN. The other $600 million consists, in large measure, of $480 million which assumes the continuing $30 million annual amount of money spent by DOD for 16 years.
That is why I am saying earlier that it is awfully hard to be precise on that. You are projecting a $30 million annual payment for 16 years to total $480 million as the cost of our maintaining our military presence in Panama, between 1984 and the year 2000.
Senator BYRD. It costs American taxpayers $870 million, according to your figures ?
Mr. DUNCAN. It will cost $870 million.
Senator BYRD. It will cost the American taxpayers $870 million ?
Mr. DUNCAN. That is right. That is the amount of money that we are estimating we will have to budget.
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Senator BYi. How about the $400 million, $20 million a year in interest payments that the American taxpayers will not get? That is, not included in that, is it?
Mr. DUNCAN. That is not pursuant to the treaty.
Senator Byiu. That is not included in those figures, correct?
Mr. DUNCAN. That is correct.
Senator BYrm. Then the American taxpayers will lose $400 million in interest payments, is that correct?
General DOLVIN. That is not clear.
Senator LEVIN. Will you identify yourself for the record?
Mr. DUNCAN. This is General Dolvin, my staff man on the Panama, Canal issue.
General DOLVIN. The bill you are considering does not have that $20 million.
Senator BYrd. I understand it does not. That is what I am complaining about.
The fact is that the American taxpayers, without the treaty, would have received $20 million a year for 20 years, totaling $400 million. They will not receive that as a result of the treaty. Is that correct?
General DoLvI. It is a matter of how the legislation comes out, sir.
Senator BYRD. As of today, they will not receive that. Is that correct
General DOLVIN. As of today, that is correct.
Senator BYRD. That is $400 million that the American taxpayers will not receive as a result of the treaties which were passed last year?
Mr. DUNCAN. There is one other major variable, if I may mention it, Senator. That is the revenues. You do not know precisely what toll levels will be.
Senator BYRD. We know what the American taxpayers have received in the past. We do not want to mislead the American taxpayers They were misled enough last year. They were misled by the Government last year.
Let's pin this down here. Is it not a fact that the American taxpayers will lose the interest payments of $400 million over 20 years as a result of the treaty, as the matter now stands at this moment?
Mr. DUNCAN. As matters stand at this moment, they will not get those interest payments.
Senator BYnd. Thank you.
Mr. Secretary, did the Defense Department support or oppose the Murphy bill when it came before the House of Representatives?
Mr. DUNCAN. When it first came, we thought the bill was too restrictive and did not give us adequate flexibility. We think the bill now before the Senate, the bill that the Senate is considering, is a more desirable piece of legislation.
Senator BYRD. I ask again thne question: Did the Defense ID paortment suu~ort or oppose the Murphy bill when it came before the H-ouse of Representatives ?
General DoLVwN. Senator Byrd, they did.
Senator BYRD. Did what ?
General DoLVIN. Defense supported the Murphy bill, but made it cle'ir that some parts of it would be a problem.
Senator BYRu. Am I correct, General, in understanding your reply
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that the Defense Department did support the Murphy bill when it came to a vote in the House of Representatives?
Mr. DUNCAN. But with reservations.
Senator BYRD. But you supported it.
Mr. D UNCAN. With very serious reservations.
Senator BYRD. I am going to, ask again. Did the Defense Department support it, or did it oppose it?
Mr. DUNCAN. It supported it, with reservations.
Senator BYRD. I am going to ask the same question of Mr. Chris-topher.
Mr. DUNCAN. Senator, may I interrupt you, please, sir?
I am very sorry. I have another hearing at 10 a.m. 'Which I had' arranged with the chairman. I have got to excuse myself to go to a House hearing. I had worked this out with the staff and SenatorLevin previously. I am very apologetic to leave you when I know you are on a very serious thought.
Senator BYRD. That is all right.
Senator LEVIN. We will excuse you at this time, with the under-standing that if necessary we can get you back.
Mr. DUNCAN. Thank you, Mr. Chairman.
Senator BYRD. On the same subject, I would like to ask the StateDepartment, Secretary Christopher, did the State Department support or oppose the Murphy bill when it came before the House of' Representatives?
Mr. CHRISTOPHER. Senator Byrd, as you know, the administration
Senator BYRD. I know what the administration bill did. I want to. know what you did with regard to the Murphy bill.
Mr. CHRISTOPHER. Senator, in connection with final passage, the State Department supported the bill as it was then before the Houseof Representatives. Although we expressed concern about a number of its provisi ons, we did encourage thHostopstebilhaws before it at that time. ~ h os ops h ilta a
Senator BYRD. That is good.
'The State Department-I want to get this straight, now-the State Department did encourage the House of Representatives to pass the, Murphy bill?
Mr. CHRISTOPHER. Yes, sir. We made it clear at the time of passage that we felt there were provisions in the bill that were undesirable; nonetheless, given the legislative situation, we. thought, on balance, that it was our role and duty to encourage the House to enact the. ill.-
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Senator BYRD. Giving away the Panama Canal was done, according to the State Department, serving the best interests of the United States?
Mr. CHRISTOPHER. We thought the treaties were in the best interests of the United States, Senator. However, the $870 million did not arise from the treaties. That figure arises from the Department of Defense estimates as to what expenditures will be required over the next 22 years to protect our interests in the canal.
Senator BYRD. What is your position on the $400 million that is
owed the American taxpayers for interest over the next 20 years?
Mr. CHRISTOPHER. First, Senator, let me point out that that is a statutory issue, not a treaty issue.
In 1951 Congress decided to require a payment of interest. There was discussion of this subject last year, when the treaties were approved, and I think there was an assumption at that time that those interest payments would not be required in the future.
Senator BYRD. I am asking the State Department's view on that right now. Does the State Department feel that those interest payments should be made, or should not be made?
Mr. CHRISTOPHER. The State Department feels that those interest payments should not be made.
I emphasize, however, that this is a congressional issue. Congress will have to determine whether or not those payments should be made.
If the payments are made, it will result in an increase in tolls and an increase in costs to U.S. shippers and others using the canal.
Senator BYRD. In either case, the Americans lose. If you increased the tolls by 20 percent, according to your testimony-that adds to the cost of living to the American people. If you eliminate that $400 million that the American people would get had the treaty not been ratified, the American taxpayers lose the $400 million.
The American people lose in either case.
Mr. CHRISTOPHER. Yes, Senator, Congress will have to choose whether they desire to have the interest payments continue or whether they would prefer to have lower tolls.
Senator LEVIN. Senator Byrd, your 10 minutes have run. Senator Warner?
Senator WARNER. Thank you very much, Mr. Chairman.
While we do not have the treaty, it is inherent to the issues of management in all of these issues-the Senate as well as the House has to take into consideration the broad coverage of linkage.
We observed with interest how the House probed the alleged relationship between the Panamanian Government and the support of the Sandinista guerrillas. Would you comment on that, Mr. Christop~her, and if some of your comments involve classified material, I hope that you would assume the responsibility to inform the committee. M{r.CHRISTOPHER. Senator Warner, there is no doubt that public opinin in Panama, as in a number of other Latin American countries, is generally opposed to President Somoza of Nicaragua. The recent OAS meeting emphasized how strong and widespread that feeling is, not only in Panama, but throughout Latin America.
As you know, Senator Warner, a brigade of volunteers was formed in Panama, which was intended to support the Sandinistas in Nicara-
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gua. In fact, however, that volunteer brigade remained in Panama and never went to Nicaragua. While the brigade did receive training and logistical support, and while some 50 men probably went from Panama to Nicaragua and joined with the forces there, the brigade itself did not leave Panama.
In addition it is our understanding that Panama has granted refuge to Sandinistas who were expelled from other countries, and we have reports that Panama has been a transit point for Sandinistas returning to Nicaragua from other countries in the region.
I think it would also be accurate to say that a limited amount of material, and possibly some weapons, have been provided through Panama to the Sandinistas in Nicaragua. Having said that, however, I want to stress that this issue does not affect, or should not affect, this legislation. This issue is simply not relevant to the purposes of the legislation now before the committee.
We are here trying to formulate legislation to enable us to carry out efficiently the law of the land as reflected in the treaties.
Senator Levin, in light of the comments of Senator Byrd and other members of the committee, I would be happy to place my statement in the record and to make myself available for the committee's questions rather than taking the time to read my statement.
Would that be your preference, Senator?
Senator LEvIN. Let us continue to proceed with the questions.
Senator WARNER. Let me press on one further issue. It is your judgment that this question of linkage is irrelevant to the issues before the Congress today, and I assume that will cover also any classified material that either the Department of State or the Department of Defense has and therefore it is not necessary for you to be forthcoming with additional information?
Mr. CHRISTOPHER. Senator, we will certainly provide whatever information you specifically request. If you wish to submit particular questions, we will provide information on a classified basis.
Senator WARNER. Thank you.
Thank you, Mr. Chairman.
Senator LEvIN. Senator Jepsen ?
Senator JEPSEN. Secretary Christopher, would you characterize,. please, for this committee the Panamanian-Cuban relations in the last year; that is, have they, in fact, improved since the treaties were, signed?
Mr. CHRISTOPHER. Senator, I did not hear your question. Did yon say Panamanian-Cuban relations or Panamanian-United States: relations ?
Senator JEPSEN. Cuban. The Panamanian-Cuban relationships in. the last year; have they, in fact, improved since the treaties have be en signed?
Mr. CHRISTOPHER. I do not perceive any differences in Panam'anianCuban relations between that period and the present. There has, of course, been a major change in the Panamanian system. Panama now has a new government, a new president, and new political ground rules. I do not, however, perceive any difference in the relationships between Panama and Cuba during the course of the last year.
Senator JEPSEN. Are you aware .of-and I am asking a question th'it I do not necessarily know the answer-are you aware of any rather
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-extensive construction and so on taking place in Panama now in anticipation of the influx of Cuban people, personnel, business, military, ambassadorial, by rather substantial numbers?
Mr. CHRISTOPHER. I am not aware of that, Senator. Perhaps you should direct your question to my colleagues from the Defense Department, who may be more closely aware of developments in Panama.
Senator JEPSEN. One last question before we do that. Just for the record, do you know, is the Secretary of State going to recommend in the immediate future, once these treaties are dispensed with and disposed of here in the Congress, do you have any plans at this point that you know of to give away any of our bases or anything we have in Guantanamo or Cuba or anywhere?
Mr. CHRISTOPHER. We have no plans to that effect, Senator.
Senator JEPSEN. To your knowledge, at this time?
Mr. CHRISTOPHER. To my knowledge, we have no plans to that effect.
Senator JEPSEN. That is all.
Senator LEVIN. Senator Humphrey?
Senator HUMPHREY. Secretary Christopher, high-ranking members of the administration swore up and down all during the consideration of the Panama Canal treaties that it would not result in any additional burden on the American taxpayer. Why was the truth not told? It could well have made a big difference in the Senate vote on those treaties.
Mr. CHRISTOPHER. Senator Humphrey, that question has come up frequently, and with your indulgence, I would like to have an opportunity to reply to it.
There is no doubt that, during the course of the debates on the Panama Canal Treaty, it was stated that no payments would be made from the U.S. Treasury to the Government of Panama for the use of its territory, and that such payments would come entirely out of canal revenues.
That point was made in public statements by the Secretary of State and others. Some of these statements have been attributed to me.
From the start of the debate, we attempted to make the record as clear as we could on that subject; namely, that payments to Panama would not come out of the U.S. Treasury.
On the other hand, it has always been clear-at least in my mindthat the United States would have to spend funds to continue to exercise its defense responsibilities in Panama between now and the year 2000.
The $870 million estimates we have been discussing are not payments to Panama but are instead expenditures that the United States will have to make primarily for its military installations and! its military personnel.
I believe that the statements we made last year were substantially correct. As I said, the funds to be expended by the United States over the next 21 or 22 years are funds that would be expended to serve our own interests.
Senator HUMrPHREY. We all understand the distinction today, but I am afraid the distinction was not made very clearly a year ago. I would quote from your statement of your superior, Secretary Vance, who said, "The treaties require no new appropriations, nor will they :add to the burden of the American taxpayer."
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This $800 million-if that is what it is, and probably it is a great
-deal more-is probably going to add to the burden of the taxpayer unless someone can figure out where to find that money growing on a tree somewhere.
I just think the administration did not deal honestly with the American people on this issue. If they made that distinction, they did so in .a very faint voice, and it was overlooked.
I think that is highly regrettable.
I have no further questions at this time, Mr. Chairman.
Mr. CHRISTOPHER. Senator Humphrey, I do not want to prolong this discussion, but I have to say that we did make that distinction, .and we did so not only in a quiet voice, but in writing. While the estimates were somewhat lower last year, there was a letter from Secretary lBrown, Secretary Vance, and Secretary Alexander indicating that an estimated $350 million would have to be paid by the United States to fulfill its responsibilities in the canal.
That was never hidden from the Senate or from the American people. Moreover, I do not regard the $870 million as being on the low side-we think it is on the high side.
The point I would like to stress is that it will be entirely within the .competence of Congress to determine whether that figure is $870 million or some other figure. The Congress will have to appropriate the
-funds on an annual basis to serve the interests of the United States.
Senator HUmPHREY. Thank you.
Senator LEVIN. Senator Jepsen?
Senator JEPSEN. For the record, may I also state that had I been in the Senate last year I would not have voted for the Panama Canal treaties. I would like that as a matter of record, as the Senator from Nebraska stated.
Senator LEviN. Before I ask you some questions, I want to circulate
-a chart that we prepared which is intended to be helpful-hopefully it is accurate-relative to the cost questions. I wonder if we could ,circulate those to the Senators now, and to the folks at the table.
Would those at the table who have not identified themselves for the record do that now?
Mr. BLUMENPELD. I am Michael Blumenfeld, Assistant Secretary of the Army for Civil Works.
Mr. POPPER. I am David Popper, representative of the Secretary of "State for Panama Treaty Affairs.
Senator BYRD. Mr. Chairman?
Senator LEwI. Senator Byrd ?
Senator BYRD. I have to go to the Senate. I am involved in this bill. I wonder if I could have about 3 or 4 minutes before doing that.
Senator LEvIN. Yes.
Senator BYRD. Thank you very much.
I want to clarify a point, Mr. Christopher. On page 8 of your statement, you say under the administration bill the payment to Panama would require a total increase in the neighborhood of 15 percent. So, with or without the waiving of the $400 million in interest payments, there will be an increase in tolls of somewhere around 15 percent. Is that correct ?
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Mr. CHRISTOPHER. Yes, Senator. It was understood during the debate last year that there would be an increase in tolls. Many estimated that the increase would be higher than 15 percent. We now estimate that the increase will be between 15 and 20 percent. Our present estimate is 19 percent.
Senator BYRD. Nineteen percent.
This page 8 of this statement that I have says 15 percent, but it is, 19 percent?
Mr. CHRISTOPHER. Yes, sir.
Senator BYRD. I am glad to have that clarification.
That has nothing to do with waiving the interest payments?
Mr. CHRISTOPIIER. No, sir; that is on the assumption that the interest payments will be waived.
Senator BYRD. On the assumption that the interest payments will be waived?
Mr. CHRISTOPHER. Well
Senator BYRD. Have you changed the 15 percent on page 8 ?
Mr. CHRISTOPHER. Yes, sir. On the basis of the latest traffic figures, we have, we think a toll increase in the neighborhood of 19 percent would be required. I apologize, Senator, if you have an earlier version of my statement.
Senator BYRD. Nineteen percent.
In any case, to hold the increase in this level, namely 19 percentI am quoting from page 9-to hold the increase of 19 percent, the administration had planned, to terminate the annual payment and, if the payment is not terminated, then that means an additional 5 percent. Is that correct?
Mr. CHRISTOPHER. If the payments are not terminated, we think that the increase would exceed 25 percent; that is, an additional 5, percent increase in the tolls.
Senator BYRD. Another 5 percent.
But in any case, there is an increase of 19 percent that you foresee in tolls; right?
Mr. CHRISTOPHER. Yes, Senator. That increase is necessary to makethe payments to Panama that are called for under the treaties.
Senator BYRD. Correct.
If the American people forego the $400 million that the American people are entitled to in interest payments, then it would be an additional 5 percent, roughly, increase in tolls?
Mr. CHRISTOPHER. Yes; without the interest payment, the tollswould be approximately 5 percent lower. That is our best estimate.
You understand that these estimates have to be based upon estimates of traffic.
Senator BYRD. I understand estimates. I understand that every administration usually gives estimates on the low side to conform with whatever position that the administration takes. I am not speaking of the Carter administration alone. I am speaking of all administrations.
So the American consumer is going to pay a big price, in any case..
Mr. CHRISTOPHIER. Yes.
Senator BYRD. Thank you.
I would like to ask the General one question, and I am through.
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General, as I understood the Secretary of Defense, $72.9 million will be spent on facilities in Panama which, at the year 2000, will be turned over to Panama. Is that correct?
General DoLviN. Senator Byrd, the figure is correct, but this money is not for new facilities. Where we are moving from one military installation to another, we need to modify facilities to accommodate the new tenant.
Senator BYRD. Why are you moving?
General DoLviNx. Because the treaty stipulates it.
Senator BYRD. That is right.
General I)orvi x. Part of these installations go to Panama.
Senator BYRD. Because of the treaty. Thank you.
Thank you, Mr. Chairman.
Senator LEVIN. Let me turn your attention to this chart which we prepared to help us put some of the historical figures here in context. The first column on that chart was the administration's estimate of the cost of implementation of the treaty which was made in the letter sent by Secretary Brown to the Senate on February 10, 1978. That letter estimated a cost of $200 million for Department of Defense implementation; $150 million for early retirement; a total there of $350 million. Is that correct?
That was the $350 million figure that you mentioned?
Could we have a response into the mike so that the reporter can get it?
Mr. CHRISTOPHER. Senator Levin, that is correct. These figures are basically Department of Defense estimates.
Senator LEvIN. Let me ask the representative from the Department.
Mr. BLUMENFELD. That is correct.
Senator LEVIN. The next figure was not considered a cost of implementation. That is a foregone interest payment because the administration does not consider the loss of the interest payment as a cost to the Treasury. Is that right?
Mr. BLUMENFELD. That is correct.
Senator LEVIN. The $350 million figure is made up of the first two figures you have there. The Senate Armed Services Committee on February 23, 1978. estimated the total cost of implementation at $1.21 billion. That is colunm 2, and the component parts of that figure are shown in that column.
I am not asking for a comment on it. You may not be familiar with it.
The Senate Budget Committee estimate on February 28, 1978, is in column 3. It shows an implementation of costs of $712 to $720 billion. It includes the foregone interest payment, I may say-and so does the Armed Services Committee estimate which was in column 2.
Now, let's come down to your present estimate of costs, column 4, the administration estimate of March 29, 1979. You have mentioned the $750 million figure, the early retirement of the $205 million. Is that a possibility of coming out of the tolls right away ?
Mr. BLUMENFELD. It depends on what Congress chooses to do.
Senator LEVIN. Did the Murphy bill take the $205 million out of the tolls ?
Mr. BLUMENFELD. The Murphy bill takes the cost of early retirement out of tolls.
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Senator LEVIN. The foregone -interest payment is left blank therebecause in the Murphy bill, if I am correct-let me repeat-the administration does not consider that a cost of treaty implementation so that is left blank in column 4.
The total now in column 4, your present total, is $874 million. Isthat correct?
Mr. BLUMENFELD. I have $870.7 million. I have not tracked the $874million.
Senator LEVIN. $870.7 million?
Mr. BLUJMENFELD. That is correct.
Senator LEVIN. The fifth and sixth columns, the GAO estimates, in June and the estimate of Congressman Murphy's committee basedon the implementation costs of his bill.
I want to get back to the $400 million loss of interest figure. Youwere asked whether or not, as of today, that that is a loss to theAmerican treasury. Your answer was yes, I believe.
Mr. BLUMENFELD. It is a revenue foregone by the Treasury.
Senator LEVIN. In the House bill, that revenue is recouped throughan increase in the toll. Is that correct?
Mr. BLUMENFELD. That is correct.
Senator LEVIN.. That payment would be made to the 'Treasury?
Mr. BLnUENFELD. That is correct.
Senator LEVIN. That is the reason, for those who are following this.. chart, that in the last column where you see footnote 11 there is ioreference to foregone interest payment because the House bill has, interest payment coming into the Treasury through'a toll increase.
At the time that the interest payment was required, back in 1950,. approximately, was there not a transfer of assets to a separate entityor corporation?
Mr. BLUMENFELD. There was.
Senator LEVIN. Prior to that time, was there an. interest payment?
Mr. BLUMENFELD. No, sir, none that can be identified.
Senator LEVIN. Was the reason for that interest payment essentially because of that, transfer to! -a private entity? Did that relate in some, way to the beginning of this interest payment?
Mr. BLUMENFELD. Sir, if I may, you will be 'hearing this afternoon from Governor Parfitt who is more familiar with the 1950 action, and. I would expect you would get a more knowledgeable answer from him. this afternoon.
Senator LEVIN. The administration bill, the one before us, repealssections 34 and 35 of title II of the Panama Canal Zone Code which deals with the authority of the President and of the Governor of theCa1nalne vrcranmltr ciite ihn h aaoe
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Senator LEVIN. Would the President, as Commander in Chief, be permitted to exercise the same authority to defend the canal without the explicit language now in the existing l1aw?
General DOL IN. I would not say the precise same thing, Senator Levin, but certainly adequately. The Defense Department is happy with the bill as originally written. In the House, during questions by Mr. Murphy, an ex-military mian, the questions came up on the unity of conummand.
DOD considers that there is unity of command. It apparently is the President's decision that DOD will operate the canal acting through the Secretary of the Army. The Secretary of Defense is in the direct chain of command from the President to General McAuliffe, the commander in Panama.
In time of war, he has all the authority, in our judgment, that he needs to operate and defend the canal.
He could, if he wanted to, appoint a military man as the administrator. Whether he will choose to do that or not is problematical.
Certainly we think that the bill, as written, is adequate for the defense of the canal.
Senator LmvIN. Would direction of the Commission of the Board by the Secretary of Defense or by any other U.S. Government official violate the letter of any part of the treaties and the related documents ?
First, Mr. Christopher ?
Mr. CHRISTOPHER. As you know, the treaty contemplates a nine-man board, four Panamanians and five Americans. The United States, in the contemplation of the treaty, would exercise its authority through its majority on the board.
A provision of the bill that permitted the Secretary of Defense to direct the board, as a whole, would produce the rather paradoxical situation of having the Secretary of Defense giving directions to the Panamanians on the board of directors. I think that such a provision would be unfortunate for our relations with the Panamanians and inconsistent with the spirit of the treaties.
Senator LEvIN. Does the Defense Department want to comment any further on that point?
Mr. BLUfENFELD. The President has in mind oversight by the Secretary of Defense which is ample, and in our view, both for the operation and as General Dolvin said, and for the security needs. I would agree with Secretary Christopher.
Senator LEVIN. Is it your position that you oppose any provision which could give the Secretary of Defense the power to instruct the board how to vote, or to control the operation of the canal directly, or to instruct and take over the operation of the Commission?
Mr. BLUMENFELD. Yes, sir. We think it is unnecessary.
We would see the Commission board members, the U.S. members,. who are a majority on the board, acting to coordinate the policy guidance developed in Washington under the overall guidance of the. Secretary of Defense. It would not be necessary to have that directive language in there.
Mr. CHRISTOPHER. Senator Levin, let me make clear that the U.S. members are, in the contemplation of the administration, subject to instruction by the President, and if he should so delegate, by the Sec-
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rotary of Defense. The United States would thus have operating control, through our majority on the board and through having the administrator.
There is no objection to cohesiveness within the U.S. membership on the board; the only objection is to the proposed direction of the Panamanian members by U.S. officials.
Senator LEVIN. Senator Cohen?
Senator COHEN. I have no questions.
Senator LEVIN. Mr. Christopher, I think it would be well if we offered you an opportunity now to summarize your statement and ,then we can make all of it a part of the record, if you like. Unless somebody has pressing questions at this time, I think we should give you that chance.
STATEMENT OF HON. WARREN M. CHRISTOPHER, DEPUTY SECRETARY OF STATE, ACCOMPANIED BY HON. DAVID H. POPPER, SPECIAL REPRESENTATIVE OF THE SECRETARY OF STATE FOR
PANAMA TREATY AFFAIRS
Mr. CHRISTOPHER. Thank you, Senator Levin. I would like to be very brief and would, with your permission, ask that my entire statement be put in the record.
First, let me indicate our appreciation to Chairman Stennis for introducing the administration bill and our appreciation to you, Senator Levin, for accepting his request that you become especially familiar with these matters and take a role in these hearings.
We also appreciate the committee's cooperation in scheduling these hearings so promptly following the action by the House of Representatives.
Let me make just a few remarks on the overall spirit of the treaties, and of this legislation. Mr. Chairman, the Panama Canal treaties were negotiated between the United States and Panama on the basis of equality and fairness. The treaties were carefully designed to satisfy the basic requirements of both signatories. It is important that the element of mutual accommodation for the common advantage of both countries be preserved in the legislation, not out of altruism, but out of our own national self-interest.
Faithful compliance with the spirit, as well as the letter of the treaties, promises friendly cooperation between our two countries in maintaining a secure and efficient canal operation.
I think any unwarranted legislative tilt in our direction, at the expense of Panama, could injure that cooperation and revive past antagonisms that we were trying to put behind us in connection with the treaties themselves.
More than that, if such action were taken, it could cast doubt on the reliability of this country's pledged word. I urge the committee to insure that the bill it reports to the Senate is fully consonant with the treaties.
Such legislation will contribute directly to the security, continuity 'a d efficiency of canal operations. It Will provide a sound, mnodern framework for the effective exercise of th~e substantial rights the treaties accord to the United States; Moreover, the legislation, like the
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treaties thems 'elves, will contribute to the improvement of our relations throughout the Western Hemisphere, and will help to replace longstanding antagonisms and suspicion with a spirit of partnership and trust.
With a constructive approach of this nature, I am confident that we can look forward to a new and highly satisfying era in the peaceful and efficient use of the canal, for the benefit not only of the United States and Panama, but of world commerce.
In closing, Mr. Chairman, I would note that the treaties enter into force in less than 100 days. Time is short, and the legislation has already been substantially delayed. Those charged with the operation and defense of the canal need the legislative tools to. carry out their responsibilities. If congressional action is not promptly completed, the consequences could be serious.
Leadtime is required to make the personnel arrangements which will keep the work force on the job; to establish the Panama. Canal Commission and prepare it for operations under the canal treaty; and to provide the basis for determining the level 'of canal tolls and for establishing the financial criteria for canal operations.
With sufficient time to carry out these tasks, the canal should continue to provide efficient service to shippers, without apparent appreciable change. But if they are not accomplished by October 1, the prospects for confusion and unsettlement will markedly increase, and the continuity of canal operations will be endangered.
That is why we are so appreciative to the chairman and all the members of the committee for taking this time, in a difficult week, to commence these hearings so soon after the House has finished its action. I have no doubt, Mr. Chairman, that the committee will do its utmost to shape an effective law to carry out the treaties.
Thank you.0
[The prepared statement of Warren Christopher follows:]
PREPARED STATEMENT By DEPUTY SECRETARY OF STATE WARREN CHRISTOPHER
I am happy to meet with you today at the opening -of this committee's hearings on 5. 1024, a bill designed to implement the Panama Canal Treaty of 1977 and related agreements.
IWe appreciate Chairman Stennis' cooperation in introducing the bill prepared by the administration. We particularly appreciate the committee's cooperation in scheduling these hearings so promptly, following action by the House -of Representatives last week on its version of the implementing legislation. The legislation yon are considering will forge the major remaining link in a chain of events which began 15 years ago. It will enable the United States, in cooperation with Panama, to put into effect new arrangements for the operation
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On June 16 of that year President Carter and General Torrijos exchanged the instruments of ratification for the two treaties, to be effective as of April 1, 1979. In ratifying the treaties, Panama agreed to comply with the amendments, reservations, conditions and understandings attached by the Senate.
The following day, June 17, the President requested American employees in the Canal Zone, both civilian and military, to cooperate in the transition of the new treaty status and assured them that our Government would fully and fairly protect their conditions of life and employment.
In the -succeeding months, the Governments of the United States and Panama moved forward vigorously with planning for the multitude of changes confronting them. In an atmosphere of exceptional cooperation, more than 30 joint committees have worked to prepare for these changes. A number of ancillary agreements have been concluded.
Panama has adopted its implementing legislation and has established a Panama Canal Authority to coordinate the preparations for assuming its new responsibilities under the Canal Treaty. In a Washington visit last month, President Royo of Panama reaffirmed Panama's intention faithfully to comply with the treaty's terms.
Within the same timeframe, Panama has been making significant gains in the observance of human rights and democratic practices. A civilian government has been established; political parties function actively; censorship of the press and media has been lifted.
Panama is also formulating plans for the economic development of the portions of the present Canal Zone which will be turned over to it under the treaty. Its efforts will undoubtedly, create new commercial and investment opportunities. for U.S. business.
Of course much remains to be accomplished. A period of intense activity lies ahead. In many respects, the Canal Treaty determines what shall be done, but not how it shall be done. The legislation will fill that gap." For example:
The treaty gives the United States the right to operate the Canal until the year 2000 through a U.S. Government agency; the legislation creates that agency (the Panama Canal Commission).
The treaty gives the United States the right to control relations with its employees in accordance with United States law; the legislation establishes a Panama Canal employment system and provides special benefits to assure that the Canal work force will continue to serve with the professionalism and dedication that have characterized it in the past.
The treaty grants the United States rights to exercise criminal jurisdiction over its citizens; the legislation establishes mechanisms for doing so.
The treaty establishes new criteria for the collection and utilization of Canal tolls; the legislation correspondingly adjust the basis for setting toll rates and financing the operational expenditures of the Canal enterprise.
In the course of these hearings, this committee will familiarize itself with the details of the legislation. It is important, however, not to lose sight of its broader purposes. The legislation must be a vehicle for the productive changes contemplated by the treaties; at the same time, it must as far as possible, continue the tried and tested arrangements which have made our operation of the Canal so succssful over the years.
Where we have in the past exercised virtually -complete, authority in the Canal Zone, the legislation must now provide for operations in territory under Panamanian jurisdiction. Pursuant to the treaty, functions 'not directly connected with the actual operation of the Canal must be transferred, some to
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