[Senate Hearing 105-672]
[From the U.S. Government Publishing Office]
S. Hrg. 105-672
THE PANAMA CANAL AND UNITED STATES INTERESTS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
__________
JUNE 16, 1998
__________
Printed for the use of the Committee on Foreign Relations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
----------
U.S. GOVERNMENT PRINTING OFFICE
49-528 cc WASHINGTON : 1998
COMMITTEE ON FOREIGN RELATIONS
JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana JOSEPH R. BIDEN, Jr., Delaware
PAUL COVERDELL, Georgia PAUL S. SARBANES, Maryland
CHUCK HAGEL, Nebraska CHRISTOPHER J. DODD, Connecticut
GORDON H. SMITH, Oregon JOHN F. KERRY, Massachusetts
CRAIG THOMAS, Wyoming CHARLES S. ROBB, Virginia
ROD GRAMS, Minnesota RUSSELL D. FEINGOLD, Wisconsin
JOHN ASHCROFT, Missouri DIANNE FEINSTEIN, California
BILL FRIST, Tennessee PAUL D. WELLSTONE, Minnesota
SAM BROWNBACK, Kansas
James W. Nance, Staff Director
Edwin K. Hall, Minority Staff Director
(ii)
C O N T E N T S
----------
Page
Barr, Hon. Bob, Member, U.S. House of Representatives, From
Georgia........................................................ 15
Prepared statement........................................... 16
Falcoff, Dr. Mark, Resident Scholar, American Enterprise
Institute, Washington, D.C..................................... 19
Prepared statement........................................... 21
Moorer, Admiral Thomas H., U.S. Navy (Retired), Former Chairman,
Joint Chiefs of Staff.......................................... 5
Prepared statement........................................... 10
Pastor, Dr. Robert A., Director, Latin American and Caribbean
Program, The Carter Center, Atlanta, Georgia................... 26
Prepared statement........................................... 29
Appendix
Replies of Admiral Thomas H. Moorer, (U.S.N. Ret.) to the
Comments of Hon. William Hughes, Ambassador to Panama, Upon
Adm. Moorer's Testimony Before the Foreign Relations Committee
of the United States Senate.................................... 45
(iii)
THE PANAMA CANAL AND UNITED STATES INTERESTS
----------
TUESDAY, JUNE 16, 1998
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:15 a.m. P.m.
In room SD-419, Dirksen Senate Office Building, Hon. Jesse
Helms, Chairman, presiding.
Present: Senators Helms, Dodd, and Sarbanes.
The Chairman. Well, I see some familiar and friendly faces
here this morning, and I appreciate your being here, Chris.
Senator Dodd. Mr. Chairman.
The Chairman. This morning's hearing of the Foreign
Relations Committee will focus on the future of the Panama
Canal. Many of those assembled here today were on one side or
the other of the Senate debate leading to the ratification of
the Panama Canal Treaties. Now, we are not here this morning to
re-open that debate. However, we decided some weeks ago that,
the time being what it is, that the Senate ought to be aware of
a lot of facts that we hope to bring out. Nor are we here to
cast doubt on the intent of our government regarding U.S.
treaty obligations.
But many of the concerns that some of us raised in the
Senate in that debate 20 years ago are just as relevant and
timely today as they were back then. After all the Carter-
Torrijos Treaties did not suspend the laws of gravity, alter
the world's geography, or shrink America's national security
interests. In fact, we share today with the Panamanians an
abiding interest in the continued secure and efficient
operation of the canal.
We have asked this morning's witnesses to address a number
of issues which I believe to be timely. First, regarding the
canal's operations, is it being maintained and operated
efficiently today? Are the Panamanians well-prepared to take on
the enormous task of running the canal efficiently and
honestly?
Second, regarding the security of the canal, we will be
discussing with our witnesses questions about the current
United States military presence in Panama. Now, these witnesses
will be asked to describe the importance of this presence to
our--meaning the United States--broader security interests in
the region, as well as our Nation's ability to defend and
protect the canal as stipulated in the treaty. We also raise
the important question of whether Communist China has gained a
foothold in the Panama Canal through one of its front
companies.
Third, we are going to discuss the impact of Panama's
turbulent political situation and what effect it will have on
the canal's future. We are going to ask several of our
witnesses to explain how Panamanians and their friends in the
region can work together to ensure transparent and fair
elections in the years ahead.
Now, before introducing our panelists, I will exercise the
Chairman's prerogative to address two specific issues that seem
to me at least to be especially important. During the past
several years the Congress has called upon the President to
open talks with Panama to ensure the continued presence of
United States troops in that country beyond December 31, 1999.
Frequent polls show that a majority of Panamanians support such
a presence, and canal users around the world hope that our
troops will remain nearby for the sake of stability. Most
important, our forward deployment in Panama is important to the
security of the canal and to United States anti-drug efforts
and other key military activities in the region.
It may well be that the administration will have opened
these talks too late. But United States negotiators made up for
lost time and produced a viable plan to maintain a United
States military presence in Panama, and that plan was ready for
signature by both sides last December.
Since that time the Panamanian Government clearly has not
bargained in what I regard as good faith. Panamanian
authorities scuttled the earlier bilateral agreement and
reopened a series of previously settled issues. And, just this
month, Panama has sought to impose dramatic limitations on the
size, scope, and duration of United States presence there.
Now, I for one insist that it be made clear that the United
States Congress--that means the House and the Senate--
recognizes the importance of a continued presence of United
States military forces in Panama. If the Government of Panama
is prepared to negotiate in good faith, our troops should
remain to carry out a variety of missions beneficial to both
countries.
However, if the Panamanian officials insist on playing
petty domestic politics on this vital security issue, the
international community may well judge Panama as failing a
first test of its ability to preserve the integrity of the
Panama Canal.
I, for one, hope the administration will hear two clear
messages this morning; the first being, of course, that our
troops can remain under an agreement ensuring an adequate size,
scope, duration, and security of the U.S. mission there.
Second, it is better to sign no agreement than to sign a
bad agreement.
Let me make one final point that is keenly relevant both to
the security of United States troops and to the future of
Panama. Most of us may recall that a young American Army
Sergeant--his name was Zak Hernandez--was murdered in Panama in
1992. Eyewitnesses identified as one of the killers Pedro
Gonzalez, the son of a political crony of Panama's current
president. A Panamanian jury trial acquitted Gonzalez last
November. In a bizarre twist, the diligent police official who
investigated the murder of Hernandez now faces a political
witch hunt.
Now, what my colleagues in the Senate and all of our
colleagues in the House of Representatives may not know is that
the alleged killer, Pedro Gonzalez, is now a candidate for
Panama's Congress and the amnesty that goes along with that job
on the ruling party's slate.
It seems to me that justice for Zak Hernandez is an unpaid
debt that the United States of America should neither forgive
nor forget.
Senator Dodd.
Senator Dodd. Thank you very much, Mr. Chairman. Let me
thank you for hosting and holding this hearing today. I think
it is highly appropriate in relevant that we examine the issue
of the Panama Canal treaties and the status of them as we are a
year and a half away from full implementation of those
agreements. So it is very worthwhile to hear from witnesses who
will share with us their observations about where we stand
today.
I point out there are some here--it is almost as if, to
quote Yogi Berra, Mr. Chairman, ``It is like deja vu all over
again'' as I look out here. And while not a member of the U.S.
Senate when these treaties were first being considered,
certainly, like most Americans, I followed them rather closely
and recall, Mr. Chairman, certainly in the case of Bob Pastor
and Admiral Moorer--in fact, Admiral Moorer I think testified
in October 1977, if I went back and looked at the record
correctly. He was sitting at this very table. So we welcome you
back, Admiral, to this table and appreciate very much your
being here today.
Bob Pastor, of course, was deeply involved in these issues.
And Dr. Falcoff, I have read your writings and so forth. I do
not know if you were testifying back 20 years ago.
Dr. Falcoff. No, I was not in Washington at that time,
sir.
Senator Dodd. But anyway, welcome back to all of you here.
As I said, Mr. Chairman, in slightly more than a year and a
half the Government of Panama will assume full responsibility
for the management, operations and maintenance of the Panama
Canal. The terms and conditions for the reversion of the canal
and related properties to full Panamanian control by the end of
1999 is spelled out, of course, in the 1997 Panama Canal
Treaty.
Under the terms of a second treaty entered into at the same
time between the United States and Panama, the treaty
concerning the permanent neutrality and operation of the Panama
Canal, the Government of Panama recognizes the canal as an
international transit waterway, declares its permanent
neutrality, and commits to keeping it secure and open to
transit by all nations in times of peace and war. The United
States and Panama jointly agreed pursuant to this treaty to
maintain this regime of neutrality.
The world obviously has changed dramatically since this
body, the Senate, gave its advice and consent to ratification
of these two treaties some 20 years ago. A major concern raised
during the course of the very extensive debate on these
treaties was the intentions of the Soviet Union and a fear that
this strategic location would come under Soviet influence and
threaten the United States' interests. Another concern was that
Panama was not a democracy, but was governed by a military
dictator whose motives would be suspect.
Well, the treaties have been in effect now since 1979,
almost 20 years. So far no dire consequences have befallen the
canal. Today, of course, the Soviet Union no longer exists and
the United States enjoys relatively good relations with the
democratically elected Government of Panama, a government which
I believe is committed to honoring the terms of the treaties.
As one of our witnesses, Mark Falcoff, will testify and
concluded in a recent book on Panama: ``With the end of the
cold war, the United States no longer needs a permanent
physical presence in the isthmus and the canal itself, while
important, is no longer indispensable.'' I would maybe modify
that a bit. I think it is very important, not just
``important.'' I am not so sure it is indispensable at this
point, but it certainly may be getting to that point if
alternatives, viable alternatives, can be reached.
At any rate, the 1977 canal treaty provided for a 20-year
transition period whereby the Government of Panama would take
increasing responsibility for the day to day operations of the
canal. It also provided for the phased turnover of related
properties.
This morning I would hope we could take a look at how the
transition has proceeded thus far, as well as what remains to
be done in the coming months to ensure a seamless transition to
full Panamanian control by December 31, 1999. Above and beyond
the operation of the canal, there are other issues of mutual
concern to the United States and Panama, including the status
of negotiations between the United States and Panama to
establish a Multinational Counternarcotics Center in Panama.
This center, if established, will put to good use property that
has been under U.S. control, such as Howard Air Force Base,
Rodman Naval Station, and Fort Cobbe, on the Pacific side of
the canal that might be otherwise or might otherwise stand
idle.
It would also permit the United States forces to maintain a
presence in Panama beyond 1999, and I thank the Chairman for
raising this issue of United States military presence, a very
important one and one that needs to be, obviously, reached with
some mutual understanding here if it is going to succeed.
Other nations in the hemisphere, of course, could also be
invited and probably should be in my view to take part in the
activities of a Multinational Counternarcotics Center. I
believe that such a center could be an enormous step toward
promoting greater multilateral cooperation, something we have
not been getting, in combatting illegal drug trafficking
throughout the hemisphere.
While I understand that the Panamanian domestic political
considerations have temporarily slowed the pace of
negotiations, I would hope that our two governments could reach
a mutually acceptable agreement to make that possible in the
not too distant future. To do so would be in the interest of
both countries in my view.
Mr. Chairman, this hearing this morning should be
particularly interesting, as I mentioned earlier, in that we
have several witnesses who appeared before this committee going
back to the earliest days and have watched, I know, with great
interest over the past 20 years, despite the fact their lives
have moved on and they have covered different areas. But they
have watched this debate and watched how these treaties have
worked. So it would be very interesting, I think, to hear from
them, as I mentioned earlier.
As I mentioned, Mark Falcoff has just recently written a
very comprehensive book on this subject addressing such issues
as the tasks that lie ahead as Panama assumes full control of
the canal, as well as the implications for the role of the
United States in Panama's economy and political life. So all
three of our witnesses should add immeasurably, Mr. Chairman,
to the committee's understanding of these issues.
For those reasons, I thank you again for convening this
meeting and following up on an issue that I know you paid
tremendous attention to and interest 20 years ago, and it does
not surprise me that you would be following it and be deeply
interested in it today as well.
The Chairman. Both of us were younger then.
Senator Dodd. I had black hair in those days.
Thank you.
The Chairman. Congressman Bob Barr is on his way, but he
has been delayed, and we will hear from him when he comes. Tom
Moorer, our favorite Chairman of the Joint Chiefs of all time,
has testified before this committee many times, as well as
other committees. There is no man whom I have met in Washington
whom I respect more, and I appreciate your coming.
Dr. Mark Falcoff, Resident Scholar at the American
Enterprise Institute, and Dr. Robert A. Pastor, Director of the
Latin American and Caribbean Program of the Carter Center in
Atlanta, Georgia will also testify.
Admiral Moorer, we will hear from you first. You may
proceed, sir.
STATEMENT OF ADMIRAL THOMAS H. MOORER, U.S. NAVY (RETIRED),
FORMER CHAIRMAN, JOINT CHIEFS OF STAFF
Admiral Moorer. Thank you, Mr. Chairman. Mr. Chairman,
Senator Dodd. I am grateful for the opportunity to participate
in this hearing involving the defense of our country.
I think that the Panama Canal is vital to our defense, as
we have proved over and over again, and I will speak to that a
little bit later. But in the old days this testimony would have
been given more appropriately before the Senate Armed Services
Committee, as was the case in 1978 when I testified so
earnestly in behalf of the security of our Nation with regard
to the Panama Canal Treaty.
Now, today, 20 years later, there have been many changes in
our country and around the world. The Soviet Union has been
dismantled as we knew it. The Berlin Wall is down. And the cold
war is supposedly over.
But is our Nation now safe from harm? Mr. Chairman, I
maintain that the status of our military readiness is at an
all-time low as regards our ability to defend our country and
at an all-time high as regards the threat to our national
security, especially in our own hemisphere. Despite the fact
that we have engaged in more so-called ``contingency
operations'' than any other previous administration in the
history of our Nation, our military forces have suffered 14
consecutive cuts in the defense budget, invalidating the
longstanding policy of our country to be able to win in two
major regional contingencies simultaneously.
According to the distinguished Chairman of the House
National Security Committee, the Honorable Floyd Spence of
South Carolina, it is doubtful that we could win even one major
contingency at this point. The United States Marine Corps, by
its own admission, are prepared and trained to fight one, not
two, major contingencies at the present time.
Let me state here, Mr. Chairman, for the record the actual
approximate figures obtained recently on specific cuts which
greatly endanger our Nation. I will not go into detail because
this information is available to the committee, but let me say
that there have been significant reductions in the budgets of
about 14-plus percent for each service and there has been a
reduction of 317,000 personnel.
As an example, we are spending $2.5 billion yearly in
Bosnia alone and are still presently heavily engaged in
Southwestern Iraq. We are accepting military commitments one
after another, while simultaneously disarming America. In one
high-ranking Pentagon officer's opinion, a gentleman who
prefers to remain anonymous for obvious reasons, we will be
involved in another peacekeeping operation very, very shortly.
Mr. Chairman and members of the committee, I state these
facts and figures not so much for your information, but for
those who need to be reminded that we are on what I consider to
be a collision course with disaster in the very near future.
Today I specifically want to speak about the Panama Canal
Treaty and the very real mess in which we find ourselves in our
own hemisphere regarding a canal this distinguished body has
relinquished to the authorities in that country, effective at
the latest within the year 2000. It might have sounded like a
good idea at the time, but it was not. Many members of this
distinguished body agreed with me. Indeed, Senator Harry F.
Byrd, Jr., on 31 January inserted into the Congressional Record
my remarks made on that same date to the Senate Armed Services
Committee, including a letter from me and other military
officers to the President in which we expressed deep concern
about Panama.
Ironically, 20 years ago we were in better shape militarily
than we are today. Today, unfortunately, the fears and concerns
of those of us who have had military experience over a great
number of years in a great many different situations have been
absolutely confirmed.
In 1978, I along with Admiral Robert Carney, Admiral George
Anderson, and Admiral Arleigh Burke pleaded with the President
not to give away the Panama Canal. Our pleas, along with those
of many still serving in this body, went unheeded.
Most of the time it is gratifying to be proved correct in
one's views. However, this time I cannot state strongly enough
that I wish we had been dead wrong and that the President and
his supporters had been right. This is absolutely not the case.
Much has been in the press lately about so-called White
House scandals, rumors of obstruction of justice, and daily
commentary on the President's personal lifestyle. I cannot say
that these matters do not concern me at all, but they pale in
comparison to my main concern, which is, now as in the past,
the security of our country and the ability of this great
Nation to defend itself. So regardless of the press reports
which sell TV programs, magazines, and newspapers, and which
full the gossip mills throughout the country, we are really
missing the point if we do not concentrate on the security
aspects of the actions or inactions of this administration and
the consequences that will surely follow.
Mr. Chairman, I have been honored to serve as this Nation's
commander in chief of the Pacific Fleet, commander in chief of
the Atlantic Fleet, Chief of Naval Operations, and Chairman,
Joint Chiefs of Staff. I truly cannot remember a time when I
have been more concerned about the security of our country.
Perhaps you think that remark strange, with the history of
World War I and II, the Korean War, and the Vietnam War. But it
is a statement I will stand behind, for the following reasons.
Since 1812 no war has been fought against a foreign enemy
on American soil. This is a very long time ago. I am an old
sailor now, but I know trouble when I see it and, Mr. Chairman
and distinguished members of this committee, I see big trouble
in Panama, trouble that could evolve quickly into a conflict in
our own hemisphere with worldwide implications.
Mr. Chairman, I speak of the transfer of the Panama Canal
to the Panamanian Government under the circumstances which now
exist. Perhaps some of you will say that is old news, but there
is far more going on than meets the eye.
A company called Panama Ports Company, affiliated with
Hutchison-Whampoa Limited through its owner, Dr. Li Ka-Shing,
currently maintains control of four of the Panama Canal's major
ports. Now, Panama Ports Company is 10 percent owned by China
Resources Enterprises, the commercial arm of China's Ministry
of Trade and Economic Cooperation. On July 16, 1997, Senator
Fred Thompson was quoted by the South China Morning Post as
stating that China Resources was ``an agent of espionage,
economic, military, and political, for China.''
Further, this same newspaper article said that China
Resources ``has solid relations with the Lippo Group.'' In 1992
it acquired 50 percent of the Hong Kong Chinese Bank, which is
also 50 percent owned by Lippo, and sold its stake to its
listed arm, China Resources Enterprises.
True, Hutchison-Whampoa Limited is listed on the London
Stock Exchange. But what does that mean? Not a thing. Many
companies in the United States in the past were perfectly
legitimate companies, although funded by the Mafia. A stock
exchange listing is inconsequential and not a reliable
reference.
Hutchison-Whampoa controls countless ports around the
world. My specific concern is that this company is controlled
by the Communist Chinese and they have virtually accomplished,
without a single shot being fired, a stronghold on the Panama
Canal, something which took our country so many years to
accomplish. The building and control of the Panama Canal along
with military and commercial access is in our own hemisphere.
This stronghold of power has been almost completely
accomplished through something called Law No. 5, passed by the
Panamanians. This law provides, among other things, the
following concessions to the Chinese:
One, responsibility for hiring new pilots for the canal.
Pilots have complete control of all ships passing through the
canal.
Two, assumes control over critical Atlantic and Pacific
anchorages, including a monopoly on the Pacific side when
Rodman Naval Base is vacated next year. According to Law No. 5,
effective March 4, 1997, Hutchison has a right to demand
possession of Rodman.
Three, they have authority to control the order of ships
utilizing the entrance to the canal on the Pacific side and
also the right to deny ships access to the ports and entrances
of the canal if they are deemed to be interfering with
Hutchison's business. This is in direct violation of the 1977
Panama Canal Treaty, which guarantees expeditious passage for
the United States Navy.
Four, the right to unilaterally transfer its right to a
third party, any company or any nation which they choose
anywhere in the world.
Five, certain public roads became private, cutting off
strategic areas of the canal.
Six, included in the deal with Hutchison is U.S. Naval
Station Rodman, a portion of U.S. Air Station Albrook, Diablo,
Balboa, a Pacific U.S.-built port, Cristobal, an Atlantic U.S.-
built port, the island of Telfers, which is strategically
located adjacent to Galeta Island, a critical communications
center. I am told that Telfers Island is the future home of the
Chinese-planned export zone, ``The Great Wall of China.''
A clause was inserted in the end of Law 5 which states that
if a conflict between provisions of the law and provisions of
the canal treaty occurred, the canal treaty prevails. Of
course, point number 7 which I just read is meaningless if the
U.S. Government does not act today.
In my testimony before the Senate Armed Services Committee
in 1978 I stated:
The defense and use of the Panama Canal is wrapped
inextricably with the overall global strategy of the
United States and the security of the free world. I
submit that if the United States opts to turn over full
responsibility for the maintenance and operation of
such an important waterway to a small, resource-poor,
and unstable country as Panama and then withdraws all
United States presence, a vacuum will be created which
will be quickly filled by proxy or directly by the
Soviet Union, as is their practice in every
opportunity. Also noteworthy is the fact that in July
of last year a Soviet commission visited Panama seeking
port and airport concessions and offering economic
assistance.
The Soviet Union's thinking and conclusions about the canal
and their approach to gain control of this important
strategically situated waterway was not lost on the Chinese
Communists. They have replicated the Soviet Union's intent to
the letter quickly, silently, and successfully.
In the first place, Mr. Chairman, Law No. 5 is illegal. It
runs counter to the so-called treaty entered by this country
with Panama calling for a neutrality provision. I say ``so-
called treaty'' because the treaty was never signed by Panama.
I have been acquainted with President Lacas, who held office at
the time, and seen him several times and he assured me that he
was never asked to sign the treaty and he never did sign the
treaty. It was signed by Torrijos, who was one of the renegades
of the Panamanian operation.
Under Panamanian law a treaty cannot be simply entered into
by its governing body. A plebiscite must be held so that the
Panamanian people can voice their approval or disapproval with
a vote. No such plebiscite has ever been held.
Additionally, the bid process for port control in the Canal
Zone has been flawed. That is a nice way to put it. Bechtel, a
U.S. company, for instance, reportedly won the bid on four
occasions, but the bids were set aside. We now know why.
Bechtel bid $2 million yearly and Hutchison bid $22 million
yearly, beating out Bechtel on the last bid process by a
whopping $20 million yearly. So the Panamanian authorities
receive $22 million each year from Hutchison, a known Communist
Chinese-controlled company, in their 25 year agreement,
renewable for an additional 25 years, for a total of 50 years.
Mr. Chairman, 50 years is a long time and $22 million a
year is a lot of money. If that is not news enough, the so-
called Law No. 5 provides that Panama can assign its rights
under this agreement with no further ado. This assignment, Mr.
Chairman, could be given to Cuba, the actual Communist Chinese
Government, Libya, Iraq, Iran, or any other stated opponent of
the United States, including rogue states, rogue states who
sponsor terrorism and who have nuclear bombs aimed at this
country right now. For instance, I believe the Chinese have 13
such missiles aimed at our country today.
I do not know who has the most money, but it would probably
be difficult to outbid the Red Chinese, with $45 billion in
holdings, although Hussein might attempt to give them a run.
One thing is obvious: As in most places in the world, money
talks. That is absolutely a fact in Panama, Mr. Chairman.
As an individual who has laid his life on the line for our
country for many years and led numerous others into battle who
have paid the ultimate price, I for one cannot understand why
the government has passively permitted this Law No. 5 to
happen, thereby endangering our security interests in this
hemisphere. In a staff report to your committee in February of
last year, Mr. Chairman, it was stated:
In September 1995 Presidents Clinton and Balladares
formally announced that the United States and
Panamanian Governments would begin exploratory talks on
maintaining a United States military presence in
Panama. 15 months passed and no exploratory
negotiations transpired. Instead, in November 1996
President Balladares announced to a young left-wing
faction of the Democratic Revolutionary Party, the
political party which was founded by General Omar
Torrijos and later backed General Noriega of drug and
prison fame, that there would be no United States
forces in Panama beyond the year 2000.
Mr. Chairman, the provisions in the permanent neutrality
treaty on the Panama Canal, agreed on by both countries, is
completely ignored to the detriment of the security of this
Nation, and I find this truly unbelievable.
I will terminate my verbal comments by saying that I think
at all costs we must get the Chinese out of Panama.
Thank you, Mr. Chairman. I will submit the rest of my
statement to the committee for further study.
[The prepared statement of Admiral Moorer follows:]
Prepared Statement of Admiral Thomas H. Moorer, USN (Ret.)
Mr. Chairman, Senator Biden, and distinguished members of the
Senate Foreign Relations Committee, ladies and gentlemen:
I am indeed honored today and grateful to you for this opportunity
to testify before your important committee on behalf of the defense of
our great country.
In the old days, this testimony would have been given more
appropriately before the Senate Armed Services Committee, as was the
case in 1978, when I testified so earnestly on behalf of the security
of our Nation with regard to the Panama Canal Treaty.
Today, 20 years later, there have been many changes in our country
and around the world: the Soviet Union has been dismantled as we knew
it; the Berlin Wall is down; and the Cold War is supposedly over. But
is our Nation now safe from harm?
Mr. Chairman, I maintain that the status of our military readiness
is at an all-time low as regards our ability to defend our country, and
at an all-time high as regards the threat to our national security,
especially in our own hemisphere.
Despite the fact that we have engaged in more so-called
``contingency'' military operations than under any previous
administration in the history of our Nation, our military forces have
suffered 14 consecutive cuts in the defense budget, invalidating the
long-standing policy of our country to be able to win in two major
regional contingencies simultaneously. According to the distinguished
Chairman of the House National Security Committee, the Honorable Floyd
Spence of South Carolina, it is doubtful that we could win even one
major contingency at this point. The United States Marine Corps, by its
own admission, are prepared and trained to fight one--not two, but
one--major contingency at the present time.
Let me state here, for the record, the actual approximate figures
obtained recently on specific cuts which greatly endanger our Nation:
The total decline in overall services during the period 1993 to
1999 is 15.3 percent; that is, $267.4 billion in '93 and $257.2 billion
now. To keep pace with inflation and to maintain the status quo prior
to '93, however, $303 billion would have been required; thus, the
actual cut, in real terms, is not a mere $10 billion, but approximately
$36 billion.
Of this, the army was cut 14.2 percent, from $74.3 billion in '93
to $63.8 billion in '99, the Department of the Navy, which includes the
Marine Corps, suffered a similar cut of 14.1 percent, down from $94.7
billion to $81.3 billion in '99; and the Air Force is weathering a 14.4
percent cut, down from $89.5 billion in '93 to $76.6 billion in '99.
In overall manpower, active duty military personnel suffered a 17.8
percent cut, down from 1,776,000 in '93 to 1,459,000, despite the many
so-called military contingencies and peace-keeping operations around
the globe.
As an example, we are spending $2.5 billion yearly in Bosnia alone,
and are still presently heavily engaged in Southwestern Iraq. We are
accepting military commitments, one after another, while simultaneously
disarming America. In one high-ranking Pentagon officer's opinion, a
gentleman who prefers to remain anonymous for obvious reasons, we will
be involved in another ``peace-keeping'' operation very, very shortly,
that being Kosovo. This additional engagement of U.S. forces, according
to this very reliable source, appears imminent.
Mr. Chairman and members of the Committee, I state these facts and
figures not so much for your information, but for those who need to be
reminded that we are on what I consider to be a collision course with
disaster in the very near future.
Today, I specifically want to speak about the Panama Canal Treaty
and the very real mess in which we find ourselves in our own hemisphere
regarding a canal this distinguished body has relinquished to the
authorities in that country, effective, at the latest, within the year
2000.
It might have sounded like a good idea at the time, but it wasn't.
Many members of this distinguished body agreed with me; indeed, Senator
Harry F. Byrd, Jr. of Virginia, on 31 January, 1978, inserted into the
Congressional Record my remarks made on that same date to the Senate
Armed Services Committee, including a letter from me and other military
officers to the President, in which we expressed deep concern about
Panama. Ironically, 20 years ago, we were in better shape militarily
overall.
Today, unfortunately, the fears and concerns of those of us who
have had military experience over a great number of years in a great
many different situations, have been absolutely confirmed. In 1978, I,
along with Admirals Robert Carney, George Anderson, and Arleigh Burke,
pleaded with the President not to give away the Panama Canal. Our
pleas, along with those of many still serving in this body, went
unheeded.
Most of the time, it is gratifying to be proved correct in one's
views; however, this time, I can't state strongly enough that I wish we
had been dead wrong, and that the President and his supporters had been
right. This is absolutely not the case.
Much has been in the press lately about so-called White House
scandals, rumors of obstruction of justice, and daily commentary on the
President's personal lifestyle. I can't say that these matters don't
concern me at all, but they pale in comparison to my main concern,
which is, now, as in the past, the security of our country and the
ability of this great Nation to defend itself.
So, regardless of the press reports which sell TV programs,
magazines, newspapers, and which fuel the gossip mills throughout the
country, we are really missing the point if we don't concentrate on the
security aspects of the actions, or inactions, of this administration,
and the consequences that will surely follow.
Mr. Chairman, I have been honored to serve as this Nation's
Commander in Chief of the Pacific Fleet; Commander in Chief, Atlantic
and Atlantic Fleet; Chief of Naval Operations, and Chairman, Joint
Chiefs of Staff. I truly can't remember a time when I have been more
concerned about the security of our country.
Perhaps you think that remark strange, with the history of World
Wars I and II, the Korean War and the Vietnam War. But it is a
statement I'll stand behind for the following reasons:
Since 1812, no war has been fought against a foreign enemy on
American soil. That was a very long time ago. I'm an old sailor now.
But I know trouble when I see it, and Mr. Chairman and distinguished
members of this committee, I see big trouble in Panama--trouble that
could evolve quickly into a conflict in our own hemisphere with world-
wide implications.
Mr. Chairman, I speak of the transfer of the Panama Canal to the
Panamanian government under the circumstances which now exist. Perhaps
some of you will say, ``that's old news. We know how you feel about
that, Admiral.'' But there's far more going on there than meets the
eye.
A company called Panama Ports Company, S.A., affiliated with
Hutchison Whampoa, Ltd. Through its owner, Mr. Li Ka-Shing, currently
maintains control of four of the Panama Canal's major ports.
Now, Panama Ports Company is 10 percent owned by China Resources
Enterprise, the commercial arm of China's ``Ministry of Trade and
Economic Cooperation.''
On July 16, 1997, Senator Fred Thompson was quoted by the South
China Morning Post as stating that China Resources was, quote, ``an
agent of espionage--economic, military and political--for China.''
unquote.
Further, this same newspaper article said that China Resources,
quote, ``has solid relations with the Lippo Group. In 1992, it acquired
50 percent of the Hong Kong Chinese Bank, which is also 50 percent
owned by Lippo, and sold its stake to its listed arm, China Resources
Enterprise, last month.'' unquote.
True, Hutchison-Whampoa Ltd. is listed on the London Stock
Exchange. What does that mean? Not a thing; many companies in the
United States, in the past, were perfectly legitimate companies,
although funded by the Mafia. A stock exchange listing is
inconsequential and not a reliable reference.
Hutchison-Whampoa controls countless ports around the world. My
specific concern is that this company is controlled by the Communist
Chinese. And they have virtually accomplished, without a single shot
being fired, a stronghold on the Panama Canal, something which took our
country so many years to accomplish--the building and control of the
Panama Canal, along with military and commercial access in our own
hemisphere.
This stronghold of power has been almost completely accomplished
through something called ``Law No. 5,'' which provides inter alia, the
following:
1. Responsibility for hiring new pilots for the Canal.
(Pilots have complete control of all ships passing through the
Canal);
2. Assumes control over critical Atlantic/Pacific 6
anchorages, including a monopoly on the Pacific side when
Rodman Naval Base is vacated next year. [Note: According to
``Law No. 5,'' effective March 1, 1997, Hutchison has the right
to demand possession of Rodman];
3. Authority to control the order of ships utilizing the
entrance to the Canal on the Pacific side, and also the right
to deny ships access to the ports and entrances of the Canal if
they are deemed to be interfering with Hutchison's business--in
direct violation of the 1977 Panama Canal Treaty which
guarantees expeditious passage for the United States Navy;
4. The right to unilaterally transfer its rights to a third
party--any company or nation of their choosing;
5. Certain public roads become private, cutting off strategic
areas of the Canal;
6. Included in the deal with Hutchison is U.S. Naval Station
Rodman; a portion of U.S. Air Station Albrook; Diablo; Balboa,
a Pacific U.S.-built port; Cristobal, an Atlantic U.S.-built
port; the island of Telfers, which is strategically located
adjacent to Galeta island, a critical communications center. I
am told that Telfers island is the future home of the Chinese-
planned export zone called, ``The Great Wall of China
project.''
7. A clause was inserted at the end of ``Law No. 5'' which
states that if a conflict between provisions of the law and
provisions of the Canal treaty occur, the canal treaty
prevails. Of course, point number 7's clause is meaningless if
the U.S. Government doesn't act now.
In my testimony before the Senate Armed Services Committee in 1978,
I stated:
. . . the defense and use of the Panama Canal is wrapped
inextricably with the overall global strategy of the United
States and the security of the free world. I submit that if the
United States opts to turn over full responsibility for the
maintenance and operation of such an important waterway to a
very small, resource-poor and unstable country as Panama and
then withdraws all U.S. presence, a vacuum will be created
which will quickly be filled by proxy or directly by the Soviet
Union, as is their practice at every opportunity. Also
noteworthy is the fact that in July of last year, a Soviet
Commission visited Panama, seeking port and airport concessions
and offering economic assistance.
The Soviet Union's thinking and conclusions about the Canal, and
their approach to gain control of this important, strategically
situated waterway, was not lost on the Chinese Communists. They have
replicated the Soviet Union's intent to the letter--quickly, silently,
and successfully.
In the first place, Mr. Chairman, Law No. 5 is illegal. It runs
counter to the so-called treaty entered into by this country with
Panama, calling for a neutrality provision. I say so-called treaty,
because the treaty was never signed by Panama. Under Panamanian law, a
treaty cannot be simply entered into by its governing body; a
plebiscite must be held so that the Panamanian people can voice their
approval or disapproval with a vote. No such plebiscite has ever been
held.
Additionally, the bid process for port control in the Canal Zone
has been flawed. That's a nice way to put it. Bechtel, for instance,
reportedly won the bid on four occasions, but the bids were set aside.
We now know why. Bechtel bid $2 million yearly; Hutchison-Whampoa bid
$22 million yearly, beating out Bechtel on the last ``bid process'' by
a whopping $20 million yearly.
So the Panamanian authorities receive $22 million each year from
Hutchison-Whampoa, a known Communist Chinese controlled company, in
their 25-year agreement, renewable for an additional 25 years, for a
total of 50 years. Mr. Chairman, 50 years is a long time. And $22
million a year is a lot of money.
If that's not news enough, the so-called Law No. 5 provides that
Panama can assign its rights under this agreement with no further ado.
This assignment, Mr. Chairman, could be given to Cuba, the actual
Communist Chinese government, Libya, Iraq, Iran, or any other stated
opponent of the United States, including rogue states who sponsor
terrorism and who have nuclear bombs aimed at this country right now.
For instance, I believe the Communist Chinese have 13 such missiles
aimed at our country presently.
I don't know who has the most money, but it would probably be
difficult to out-bid the Red Chinese, with $45 billion in holdings,
although Saddam Hussein might attempt to give them a run for their
money, literally. One thing is obvious: as in most places in the world,
money talks. That is absolutely a fact in Panama, Mr. Chairman.
As an individual who has laid his life on the line for our country
for many years, and led numerous others into battle who paid the
ultimate price, I, for one, cannot understand why our government has
passively permitted this ``Law 5'' to happen, thereby endangering our
security interests in this hemisphere.
In a staff report to your committee in February of last year, Mr.
Chairman, it was stated:
``In September 1995, Presidents Clinton and Balladares
formally announced that the U.S. and Panamanian Governments
would begin exploratory talks on maintaining a U.S. military
presence in Panama. Fifteen months passed and no exploratory
negotiations transpired.
Instead, in November 1996, President Balladares announced to
a young, left-wing faction of the Democratic Revolutionary
Party (PRD)--the political party which was founded by General
Omar Torrijos and later backed General Manuel Noriega [of drug
and prison fame], that there would be no U.S. forces in Panama
beyond the year 2000.''
Thus, the provision in the permanent neutrality treaty with the
panama canal, if agreed upon by both countries, was completely ignored,
to the detriment of the security of this Nation. I find this truly
unbelievable.
All ports in the Panama Canal are of strong strategic importance to
this country, Mr. Chairman. But the most important U.S. military
installation there is Howard Air Force Base, located on the west coast
of the Canal, on the Pacific side, which has the aircraft-capable
airfield for conducting U.S. military or oversight operations. In 1994
alone, the U.S. military spent more than $4 billion in repairs and
improvements at Howard. In a recent poll, 70 percent of the Panamanian
people expressed a desire to have some kind of continuing U.S. presence
in the Canal Zone after the year 2000. They, apparently more than we,
understand the implications of the security and absolute necessity of
the Canal in war time, as well as in peace time.
For instance, the Canal is the only viable way to transport oil to
the Gulf of Mexico and East Coast from the West. And in every military
conflict--past, present or future--control of the canal has and will
remain an absolutely essential factor.
Additionally, in either the Pacific or the Atlantic, the United
States must be able to utilize the Canal freely and without constraint
to transport heavy armor, food, supplies and troops.
The recent refusal of some of the Arab states, including at least
one which has already been attacked by Saddam Hussein, to permit U.S.
landings and take-offs from their soil should make it very clear that
we cannot depend upon the good grace of other ``friendly'' nations in
time of conflict necessary to preserve world peace.
And the very recent nuclear tests in Pakistan and India should
contribute to our concern. Due to our vulnerability to incoming nuclear
missiles this was an ideal time for the President to voice his support
for the rapid development of an anti-missile, missile system.
This brings us to the Multicultural Counterdrug Center, known as
MCC, as a potential framework for the continued United States presence
in Panama.
This proposal is so far-fetched as to prove not only dangerous but
embarrassing as a truly viable solution. We've seen the drug problem in
Colombia and Mexico expand into disastrous proportions. Even with a
limited U.S. presence in the Canal, we could only hope to stand by and
watch.
The MCC would provide that numerous countries maintain a presence
and oversee conditions, allegedly to prevent drug trafficking. Mr.
Chairman, this considered option is, in my judgment, not a viable one.
The drug cartels in Colombia, Mexico and elsewhere are already
impacting on Panamanians who have been kidnaped near the Colombian
border. Some have reportedly been murdered, while others have been
returned to their families after ransom money has been paid.
This activity gives us a clue about how this MCC option would work.
I believe it simply couldn't. The board of the MCC, which could
possibly include representatives from Colombia, Cuba, Libya, Communist
China and other unfriendly nations, could even choose the aviators who
are permitted to utilize the U.S.-built and maintained runways in the
Canal Zone.
We would only be bystanders and witnesses to increased drug
trafficking, especially since closed containers marked ``humanitarian
supplies,'' for instance, could possibly be transporting heavy drug
shipments to further infiltrate the young people of this country. The
MCC would simply be another coup for the drug lords.
Reportedly, President Balladares received approximately 30 percent
of his campaign funding from the drug cartels, so I don't think he
would object. These reports are unconfirmed, but his political
statements have been public and are thus verifiable.
In a report on money laundering in Panama, the Honorable Robert
Gelbard, Assistant Secretary of State, reportedly stated the $10
billion of the $35 billion in funds that pass through Panama's
International Banking Center are drug related. Panama is considered by
some to be the Switzerland of Latin America,as the official monetary
tender, the Balboa, is equivalent and thus interchangeable with the
U.S. dollar.
I commend to the attention of the Congress a Bill offered in the
First Session of the 105th Congress, formally known as H.R. 2950 and
referred to as the ``United States-Panama Security Act of 1997.'' The
Honorable Duncan Hunter, Chairman of the House Military Procurement
Subcommittee, authored this Bill. Although I do not know the status of
this Bill, Mr. Chairman, it contains provisions which should be of keen
interest to all of us interested in national security matters.
Mr. Chairman, our own problems with reports of Chinese money into
U.S. elections is disturbing. I am not a politician, Mr. Chairman--I am
a sailor. I am too old now to serve on active duty, but I can state to
you in no uncertain terms that war is indeed hell. It's bad enough when
it's fought on foreign soil, in another hemisphere, away from the
uninterrupted lives American citizens.
But the American people would rightfully hold our government
responsible if was comes to this hemisphere. Under the present
conditions, it's not a matter of it, but when, in my judgment.
How long will it take for us to comprehend that a ``politically
correct'' military is no substitute for a lethal force, capable of
handling two major contingencies at once, especially if one of those
contingencies is in this hemisphere?
We are not talking here about an ill-funded Nicaraguan effort
against the Communists in the late '80's; we are talking about the
control of a strategic part of the world in our hemisphere, shortly to
be controlled by the largest country on earth, Communist China,
financially flush and people-strong with a growing imbalance of men
over women.
I am not here to dictate the terms of our foreign policy, Mr.
Chairman. But I can tell you honestly and truthfully, with strong
conviction, that somebody needs to take a long, hard look at our
vulnerability in the Panama Canal Zone.
The Panama Canal give-away in 1978, although worrisome at the time,
cannot begin to compare with the problem that we now face. The American
people will hold their government responsible, and rightly so, if we
don't act now to rectify the rapidly deteriorating condition of an
American strategic and globally important part of the world--that small
area in our own hemisphere which has already cost the American
taxpayers a huge sum and claimed so many American lives to construct
and maintain. Lives were also lost when we were forced to intervene
during the Noriega regime.
I don't like to offer constructive criticism without a proposed
solution, and it is a simple one, in my view: stop the process in
Panama now. Don't relinquish another square foot of American bases in
Panama unless and until the neutrality agreement already in place is
honored by the Panamanian government. The Congress should pressure the
administration to get their act together in the Panama Canal Zone.
War, Mr. Chairman, is a terrible thing. I know. Ask anybody that
has been there. Demand that the Congress and this administration
protect the American people and our strategic interest in the Panama
Canal Zone before we reach that point of no return.
The President is a charming fellow, and this country needs his
talents in the Canal Zone to protect American lives and world-wide
strategic interests. The security of our Nation, Mr. Chairman, is a
precious thing.
I have a great deal of respect for the duly elected officials in
this country, the freest place on earth. But we have dropped the ball
in the Canal Zone, and the game is almost over. Let us not go into
overtime. Let's act now.
Thank you, Mr. Chairman. I appreciate your holding this important
hearing, and I thank each member of the committee and staff for your
attention to my remarks.
The Chairman. Admiral, there may be somebody in this broad
land who knows more about this situation than you, but I have
not met him. Your statement is very excellent and I have a
hunch that it is going to be reprinted around the country by
people who still have a concern.
Congressman Barr has another commitment and he has asked us
to let him appear next so he can go to his next meeting. If
there be no objection, I would like to accommodate the
Congressman. Congressman Barr, we will be glad to hear from
you.
STATEMENT OF HON. BOB BARR, MEMBER, U.S. HOUSE OF
REPRESENTATIVES, FROM GEORGIA
Mr. Barr. Thank you, Mr. Chairman. And I appreciate
Senator Dodd being here also. I appreciate the honor of
appearing with my colleagues over here on the Senate side. I
would respectfully ask, Mr. Chairman, if my complete statement
with the attachments thereto be submitted for the record.
The Chairman. They will, and as a matter of fact the
statements of all four of the witnesses will be made a matter
of record, and I imagine it is going to be reprinted, each one
of them, extensively.
Mr. Barr. Thank you.
The Chairman. You may proceed.
Mr. Barr. Thank you, Mr. Chairman.
Mr. Chairman, whatever knowledge I have of Panama through
degrees and through having worked at the CIA for a number of
years on Latin American affairs predates that. When I was a
teenager, my dad--we were working on a project down in South
America and were transferred to Panama and our trip to Panama
was held up for many months in early 1964 because of the
trouble there.
So even as a teenager, I was aware of the sensitivities
with regard to Panama-United States relations, and certainly we
are all sensitive to that, and the relations between our two
countries have progressed considerably since then.
I have, Mr. Chairman, traveled twice recently to Panama,
once last year as part of a CODEL studying drug matters and
Panama and the Andean cocaine-producing countries; and then
earlier this year as part of a private group trip to Panama to
focus exclusively on the state of negotiations between the
United States and Panama and other countries with regard to the
Multinational Counternarcotics Center that is under
contemplation and under negotiation especially between Panama
and the United States.
My purpose, Mr. Chairman, in appearing today is simply to
do everything possible to urge our Congress, both in the Senate
and the House, and certainly the preeminence of the Chairman
and Mr. Dodd and this committee places it in the forefront of
these efforts, to urge the administration to use every means at
its disposal to move these negotiations forward.
It is my impression from talking both with Panamanian
officials as well as our distinguished Ambassador, Mr. Hughes
in Panama, who is in the forefront in country in trying to move
these negotiations forward, as well as in speaking with many
Panamanians--private citizens and political figures in Panama--
just a few months ago, that this is something that the
Panamanian people view as desperately necessary. That is, some
sort of multinational presence involving both Panama and the
United States continuing in that country, focusing, if not
exclusively, primarily on the counternarcotics effort.
The Panamanian Government sees certainly what has happened
to their neighbors to the south in Colombia with the rise of
narcoterrorists. They border, of course, on Colombia.
Notwithstanding the fact that that part of Panama, the Davide
Province bordering on Colombia, is at times virtually
impassable, it is a common border and it is of considerable
concern to the Panamanians, the overflow of the
narcotraffickers and terrorists into their country from
Colombia. That is an increasing problem as we see the
instability mounting in Colombia.
It also is of tremendous concern to the Panamanians, the
fact that their country as a financial crossroads, not just for
Central America but for the entire world, is becoming not
necessarily a haven, but a vehicle used with increasing
frequency by money-launderers, not only from Colombia and
Mexico but other countries as well.
So we have a unique opportunity, Mr. Chairman, to establish
a functional and very important Multinational Counternarcotics
Center in Panama. The negotiations appear, despite the best
efforts, I believe, of the Ambassador and certain others, do
not seem to be moving forward. I do not know whether this
reflects a disconnect between the needs of our country and
Panama and the policymakers in this administration or some
other unknown reason, but they do not seem to be moving
forward.
Every day that goes by, Mr. Chairman, as that timetable
that I am sure has been discussed here with other witnesses
moves forward, it makes it more and more difficult and more
costly to move forward. I would simply and very respectfully
urge the committee chair, Mr. Dodd, and the other members of
this committee to do everything they can, given the importance
of this matter, to move these negotiations and urge the
administration in every way we can here in the Congress to move
these vital negotiations forward.
I believe it is absolutely essential if we are to get a
handle on the money-laundering and narcotics trafficking from
Colombia, through Central America and Panama into our country
and indeed into other parts of the world, primarily Europe.
I appreciate the chair's indulgence and Mr. Dodd's
indulgence as well and the honor for appearing here today.
[The prepared statement of Mr. Barr follows:]
Prepared Statement of Congressman Bob Barr of Georgia
Good morning Mr. Chairman and thank you for the opportunity to come
before you today. Mr. Chairman, under the 1977 Panama Canal Treaties,
the United States is to hand over full operational control of the
Panama Canal and to withdraw all troops from the country by December
31, 1999. I have visited the Canal twice recently, and there is a great
deal to be concerned about.
The drug trade, and its accompanying terrorism and instability, is
a constant threat to Panama, which borders on Colombia with its
expanding narco-terrorist problem. It would be foolhardy to argue drug
traffickers do not have an interest in Panama.
Panama is itself a world commercial and transportation crossroads.
As such, it is a tempting target for terrorists, narcotics traffickers
and money launderers. A strong, multi-national anti-drug presence in
Panama would decrease the ability of narco-traffickers to ply their
trade, in and through that vital country. We must move forward quickly,
while there is still time. If we wait until January 1, 2000, the
difficulties of establishing such a center will increase substantially
if not prohibitively, and its chances for success will be severely
lessened. I know Congress does not want this to happen, but we must do
more than wish. We must act.
Recently, I successfully introduced a Sense of Congress Resolution
to provide momentum for the establishment of a Counter-Drug Center in
Panama. The U.S. Ambassador to Panama, the Honorable William J. Hughes,
is very supportive of the resolution as witnessed by the letter dated
May 28. 1998. Mr. Chairman, I would request that my communications with
Ambassador Hughes be made a part of the record.
As you are aware, Mr. Chairman, the U.S. is currently in
negotiations with Panama and we must make sure the Administration does
everything within its power to successfully conclude these negotiations
sooner rather than later. It is not now doing anywhere near what it
could or ought to be doing.
The lack of a U.S. presence in Panama is likely to have the
greatest effect on our counterdrug operations. Howard Air Force Base
and its runways, taxiways, aircraft staging areas and maintenance
facilities are the center of gravity for our current counterdrug air
operations. To conduct the kinds of missions we require, at current
frequency and duration from bases in the continental United States,
would require assignment of significantly greater numbers of both
mission and support aircraft.
Costs would rise exponentially, and in light of other worldwide
commitments the availability of assets is questionable. In addition to
resource considerations, the realities of geography merit attention.
Panama, with its extensive base infrastructure which has been developed
over the past 95 years, is ideally situated to support both regional
engagement and counterdrug missions. The later requirements are
particularly important. Panama provides safe and secure operating bases
immediately adjacent to the nations of the Andean Ridge where we
prosecute our extensive source zone operations.
Mr. Chairman, there are four key points which are critical to any
continued U.S. presence in Panama: (1) adequate force protection; (2)
acceptable quality of life; (3) U.S. command and control of U.S.
forces, and (4) multi-mission capabilities.
In addition to counterdrug missions, any military authorization
should include the ability to conduct other missions such as search and
rescue, disaster relief, humanitarian assistance and logistic support
for our regional engagement activities. It should be noted these
missions benefit not just the United States and Panama, but all nations
in the hemisphere.
Panama wants something done. Our hemispheric and national interests
demand that something be done. Mr. Chairman, this Committee, and its
counterpart in the House, must take the lead. In the absence of such
leadership, nothing will happen except very tragic consequences.
__________
The Honorable Bob Barr,
7th District, Georgia,
Congress of the United States.
May 22, 1998
The Honorable William J. Hughes,
Ambassador of the United States to Panama,
Unit 0945,
APO AA 34002.
IN RE: Multi-national Counter Narcotic Center
Dear Bill:
I am pleased to enclose the final language for an amendment which I
proposed and which was adopted by the full House of Representatives on
May 21, 1998, as an amendment to the U.S. Department of Defense
Authorization Bill for Fiscal Year 1999, HR 3616. I am also enclosing a
copy of my remarks, which appeared in the Congressional Record,
amplifying my reasons for proposing, and the rationale for the House of
Representatives adopting, this language.
This language, which I anticipate will be adopted in the final
legislation, reflects the strong desire by the Congress of the United
States to see that a multi-national counter narcotics center is
developed, and that the negotiating process leading up to the
implementation thereof, proceeds more rapidly and productively than
recently.
If I might be of assistance, I hope you will not hesitate to
contact me. Looking forward to seeing you again soon, and with kind
regards,
I remain, very truly yours,
Bob Barr,
Member of Congress.
cc: The Honorable Floyd Spence
The Honorable Ben Gilman
The Honorable J. Dennis Hastert
__________
h3680 congressional record--house may 21, 1988
* * * * * * *
modification to amendment no. 24 offered by mr. barr of georgia
Mr. BARR of Georgia. Mr. Chairman, I ask unanimous consent
that the amendment at the desk in place of amendment D-24 be
inserted in this en bloc amendment.
The CHAIRMAN. The Clerk will report the modification.
The Clerk read as follows:
Amendment, as modified, offered by Mr. Barr of Georgia:
The amendment as modified is as follows:
At the end of subtitle C of title X (page 227, after line
14), insert the following new section:
sec. 1023. sense of congress regarding establishment of counter-drug
center in panama.
In anticipation of the closure of all United States military
installations in Panama by December 31, 1999, it is the sense
of Congress that the Secretary of Defense, in consultation with
the Secretary of State, should continue negotiations with the
Government of Panama for the establishment in Panama of a
counter-drug center to be used by military and civilian
personnel of the United States, Panama, and other friendly
nations.
Mr. BARR of Georgia (during the reading). Mr. Chairman, I ask
unanimous consent that the amendment be considered as read and
printed in the Record.
The CHAIRMAN pro tempore (Mr. Pease). Is there objection to
the request of the gentleman from Georgia?
There was no objection.
Mr. BARR of Georgia. Mr. Chairman, I appreciate the
opportunity to have this amendment in the en bloc amendment,
and particularly as amended.
This amendment puts the Congress of the United States firmly
on record as encouraging and supporting and urging the
administration of this country and the administration in Panama
to do everything possible to move forward the negotiations for
the development of a multinational counter-drug center to be
located in Panama after the date of December 31, 1999, which is
when all U.S. military and civilian presence in control of the
canal ceases.
This is a very important set of negotiations that are moving
forward. They have not been moving forward with the dispatch
that is necessary. And I think it is important in our joint
effort with Panama and our colleagues in Latin America to go on
record as encouraging, supporting and proactively moving
forward with these very important negotiations for the
development of a mulitnational counter-drug center to be
located in Panama with military and civilian personnel from
Panama, the United States and other friendly nations to fight
the war against drugs.
* * * * * * *
__________
Embassy of the United States of America,
Panama, Republic of Panama,
Office of the Ambassador.
May 28, 1998
The Honorable Bob Barr,
Member of Congress,
1130 Longworth House Building.
Dear Bob:
Thank you for your letter of recent date enclosing a copy of your
Sense of Congress Resolution on the MCC negotiations and which was
adopted as an amendment to R3616, the Defense Authorization Bill for FY
1999.
Congratulations! Needless to say, I very much appreciate your
continued support and assistance in our effort to bring the
negotiations for a multi-lateral counter-narcotics center to a
successful conclusion.
While there are some issues yet to settle, I know I speak for our
Chief Negotiator Ambassador Ted McNamara and our negotiating team when
I say that we remain committed to a positive outcome and hopeful.
With kindest personal regards, I remain,
Sincerely,
William J. Hughes,
Ambassador.
The Chairman. Thank you, Mr. Barr.
I am tempted to ask if there are any questions at this
point.
Senator Dodd. No. I appreciate the Congressman has another
place to be. But I think the point is made, which both of us
have made before you arrived, Congressman, of the importance of
this Multinational Counternarcotics Center, which I think makes
very good use of some of the properties in the zone. I hope
that we can get something going on this, because if we do not
it is going to get worse and worse.
I appreciate your coming.
Mr. Barr. Thank you, Mr. Dodd.
Thank you very much, Mr. Chairman.
The Chairman. That is the purpose of this hearing, to get
something going, because it was lying dormant until we looked
at the situation and saw what was happening or not happening.
But thank you and we will be glad to have you stay around.
But I expect you have got some votes coming up.
Mr. Barr. Thank you, Mr. Chairman. As part of my comments
which the chair was kind enough to submit for the record, there
are some comments that I made on the floor of the House last
month with regard to a sense of the Congress resolution that we
passed as part of the foreign relations bill, that urges action
in this area as well, as well as a letter from the Ambassador
in Panama.
The Chairman. Without objection.
Mr. Barr. Thank you very much. And thank you, Senator.
The Chairman. We will go back in our regular order, then.
Dr. Falcoff, you may proceed, sir.
STATEMENT OF DR. MARK FALCOFF, RESIDENT SCHOLAR, AMERICAN
ENTERPRISE INSTITUTE, WASHINGTON, D.C.
Dr. Falcoff. Thank you. Mr. Chairman, Senator Dodd. It is
an honor to have the opportunity to share with you some notions
about Panama, the canal, and United States interests in the
isthmus. These subjects are complex and I have tried to deal
with them at considerable length in my written testimony, which
you very kindly agreed to insert in the record.
I would be glad to answer any questions about any of the
other aspects that are in my written testimony. But since I was
told my time would be limited, I have decided to confine my
remarks here to the most pressing issue on the agenda, which
seems very quickly, by the way, to have taken over our
discussion here, and that is the Multinational Counternarcotics
Center.
At the time the Carter-Torrijos treaties were negotiated,
Panama's Government would not hear of any residual United
States military presence in the country. Since then, however,
ordinary Panamanians, often as many as seven out of ten, have
favored exactly that. No doubt they were influenced by the $250
to $500 million that American service personnel and their
families poured into the country each year. But they also
derived a sense of pride and security from close association
with the United States.
Contrary to what many Americans may believe from what they
have seen on the television news or been told by self-styled
experts, most Panamanians are extremely friendly to the United
States and its people.
At the same time, the Panamanian business community has
become gradually aware of the fact that the military presence
provided a kind of unspoken insurance policy against anything
too strange happening in the country, a policy which presumably
would attract considerable foreign investment. Now, I agree
with former Ambassador Ted Briggs that United States military
presences are not necessary to attract investment of very
considerable magnitude in other Latin American countries, but
Panamanian business people have told me that in their trips to
Europe and Asia they have frequently heard this issue raised.
So I assume if we are talking about perceptions, it has been an
important factor.
Now, all of this runs against the grain of Panamanian
politics as usual, which, instead of concentrating on jobs,
education, environment, health, and other concrete issues,
tends to be about saving Panama from nonexistent perils, like
contamination from the evil Yankee.
As long as the United States military was there, Panama
could have it both ways: enjoy the benefits of an American
presence and luxuriate in the role of victim, put-upon,
exploited, and deprived of its identity by a foreign occupier.
Unfortunately, within 18 months the country will no longer be
able to have its cake and eat it, too. Hence, the hatching of
President Perez Balladares' Multinational Counternarcotics
Center.
This is a trap, I submit, into which the United States
should not fall. Please permit me to explain why. First of all,
the multilaterality will be largely fictitious. Although
President Perez Balladares talks about representation from
Argentina, Brazil, Peru, Colombia, and Mexico, there is strong
opposition to participation in many of these countries. People
see this as a way of getting the military into the drug war,
which they do not want, and opposition is overwhelming in
Mexico. So that about 80 percent of the military personnel
would have to be from the United States.
Second, a center would require a new treaty. No doubt the
Clinton Administration and indeed I suppose any administration
would prefer an executive agreement. But this would contravene
article 5 of the neutrality treaty, which states unambiguously
that: ``After the termination of the Panama Canal Treaty, only
the Republic of Panama shall maintain military forces, defense
sites, and military installations within the national
territory.''
In my own view, the Senate should require the
administration to subject any residual United States military
presence in Panama, under whatever label, to this restriction
and then force the treaty to run the full gauntlet of the
ratification process.
Third, neither the United Nations nor the Organization of
American States nor any other international actor has offered
to loan the center its flag. The best President Perez
Balladares can offer is a committee of foreign ministers of
participating countries, headed by his own, to supervise the
activities of the center. As far as the United States is
concerned, this begs crucial questions of command, control, and
safety of American personnel and their families. And you, Mr.
Chairman, in your opening statement pointed out some of the
problems we are living with right now in that regard.
Fourth, as contemplated by Panama the Center will be a
permanent object of controversy. Nobody will believe in its
multilaterality. Indeed, that is precisely what the Panamanian
Government intends. However, it will be an open sore in
Panamanian politics, with agitators perpetually insisting that
it is really an American base and demanding its removal. The
fact that the current Panamanian position in the negotiations
calls for extending facilities in 3-year increments almost
certainly builds in political problems, with anti-U.S.
agitation--rent-a-crowd, a skill, by the way, which the
governing party in Panama is very good at, rent-a-crowd--with
anti-U.S. agitation returning promptly in the second year of
each cycle.
With all due respect to the distinguished former Chairman
of the Joint Chiefs of Staff, I personally believe that United
States interests are better served by a rigorous adherence to
the Carter-Torrijos Treaties and a complete and total
withdrawal of our military forces from Panama. If we need to
accomplish certain missions related to narcotics trafficking in
the region, these could be carried out either from our own
territory or our own territory in conjunction with other
countries. As a matter of fact, I was in Miami last week
attending a SOUTHCOM conference and I was able to see the
contingency plans that are already very well advanced to put
these missions in other countries and in other areas of the
region.
But if we are to have a residual military presence in
Panama, under whatever label, then Panama must ask for it by
name, rank, and serial number. Then it should submit that
decision to a plebiscite. No one in Panama should ever be able
to say that American troops were introduced into the country
through the back door. And as I have said, a new treaty with
appropriate status of forces agreements must be negotiated,
signed, and sent to this distinguished body for ratification.
Anything else I believe is a disservice to the U.S. national
interest.
Thank you.
[The prepared statement of Dr. Falcoff follows:]
Prepared Statement of Dr. Mark Falcoff
Mr. Chairman and distinguished members of the Committee:
It is an honor to appear before you to discuss problems relating to
Panama, the Canal, and U.S. interests in the isthmus. These hearings
are particularly timely in light of the upcoming surrender of the Canal
and adjoining facilities on the last day of 1999, as prescribed by the
Carter-Torrijos treaties ratified by the U.S. Senate in 1978 and by the
Panamanian people in a national plebiscite.
The first thing to say is perhaps the most obvious-whatever our
opinion of the treaties themselves, either now or at the time of
ratification--in a technical sense the transfer of facilities has gone
forward without serious difficulty. The United States has rigorously
adhered to the schedule established by the treaties, indeed, in some
ways has moved ahead of it. Since 1990 the administrator of the Canal
has been a Panamanian, and the overwhelming majority of employees of
the Canal authority are now Panamanian. We have expeditiously relocated
both the School of the Americas and the U.S. Southern Command to the
continental United States, drastically reduced our troop presence, and
turned over hundreds of military buildings and facilities in the old
Zone to the Panamanian government.
The orderly fashion in which this has taken place is remarkable,
particularly in view of the emotions in both countries, and the
constant accusations by elements of the Panamanian media and political
class--accusations which continue to the present day--that the United
States was (or is) secretly conspiring to go back on its agreements.
Our record stands in stark contrast to the Suez disaster suffered by
Great Britain.
On the other hand, many issues which were either ignored,
minimized, or swept under the rug at the time of ratification are
poised to foist themselves upon us. My purpose today is to discuss some
of these.
The Canal
One of the great engineering marvels of the world, the Canal is a
tribute to the determination, engineering genius, and back-breaking
work of a multinational labor force directed by our own U.S. Army Corps
of Engineers. Nonetheless, it is an old facility, and as such in
constant need of maintenance. It also requires a benevolent
environmental situation, since every ship that transits the canal
pushes 52 million gallons of fresh water from the Central Lake out into
the sea. In addition, in order to remain competitive, the Canal must be
modernized. At present neither oil supertankers nor aircraft carriers
can pass through the Canal. This deficiency could be remedied by the
construction of a third set of locks, and there are plans to do just
that. However, that eventuality is long-term and depends upon the
capacity of Panama to borrow enormous amounts of money. Whether that
happens depends largely on the country's capacity to demonstrate its
stability in the absence of a large American civil and military
presence.
Generations of Panamanian politicians have assured their people
that the Canal is a kind of potential bonanza, that, like oil in
Kuwait, once incorporated into the national patrimony, would assure
effortless prosperity for all. This has always been a gross
exaggeration. The Canal was constructed by the United States for
strategic and commercial reasons, not as a profit-making enterprise.
Indeed, under law it was supposed to merely break even, and often ran a
deficit made up by the U.S. Congress. In some recent years it has made
a modest profit, but certainly negligible in terms of Panama's overall
social and economic needs. The real economic benefit from Panama has
always come from ancillary activities-repairing or provisioning ships-
or from salaries dispensed to the Canal work force or money spent
within the territory of the Republic by the military and their
families-in some recent years amounting to as much $500 million.
In some ways the presence of the U.S. military also amounted to an
invisible insurance policy for foreign investors and traders; as long
as the Americans were there, nothing too strange would be allowed to
happen in Panama. Although the current decline in confidence suffered
by the Panamanian government in Western Europe and Asia may be
unjustified, it is at least understandable, particularly given the
country's problematic political history. This is a point to which I
shall return shortly.
The Panamanian dilemma is this-the country is condemned to make a
success of the Canal or lose its viability as a nation-state. To do
this means to pay serious attention to things like maintenance,
management, and the environment. Under all three headings there are
reasons for concern.
Maintenance. Just how well Panama has done along this line since
1978 is a matter of opinion. During the 1980s, when the country was
under military or quasi-military rule, all public facilities were
neglected, and many shippers complained bitterly about the
deterioration of Canal facilities. Since the intervention of the United
States in 1989-90, and particularly since 1994 when the present
government took office, there has been a significant increase in the
amount of resources earmarked for maintenance, and some of the
facilities at the Pacific and Atlantic ports modernized with the latest
computer technology.
On the other hand, members of the Committee should be aware of a
1997 report of the U.S. Army Corps of Engineers which identified 830
maintenance tasks requiring immediate attention. Of these, fully 389--
that is to say, 47 percent--had not even been started. They include
such arcane matters as replacing the existing locks machinery,
reactivating emergency dams (the upkeep on which had been ``abandoned
since 1982''), repairing the concrete around the locks machinery tunnel
(the work done to date was found ``less than desirable''), widening the
Atlantic entrance, refurbishing the tugboat fleet and the canal
railroad (the ``mules''). \1\ While President Ernesto Perez responded
peevishly to the report, he also implicitly endorsed its findings by
putting into motion a $1 billion program to improve Canal maintenance.
whether it will be adequate, and carried out in a timely fashion,
remains to be seen.
---------------------------------------------------------------------------
\1\ Panama Canal Commission, Master Plan to Implement the U.S. Army
Corps of Engineers (USACE) Recommendations (Panama City, 1977), pp. 2-
3, 5-6.
---------------------------------------------------------------------------
Management. Like most Latin American countries, Panama has at best
a spotty record of managing public enterprises. These are usually run
as employment agencies for deserving members of the victorious party,
with virtually no attention paid to the bottom line. Ever since taking
office President Perez Balladares has complained that everyone in
Panama excepts to be put on the government payroll; this, he has
explained repeatedly, is an impossibility.
Nonetheless, the public sector in Panama has been large, and there
are many institutional and political reasons why its downsizing or
privatization is resisted by politicians and public alike. Moreover,
the ruling Democratic Revolutionary Party has a long history of using
public enterprises for political patronage.
The new Organic Law of the Canal is supposed to insulate the Canal
from such pressures. Nonetheless, the board of the new Canal authority
has been packed with friends and relatives of the current president,
and its new head, Jorge Ritter, is a politician with an unsavory past
and no experience whatever in maritime affairs. Moreover, the Organic
Law mandates that the Canal show a profit. However, this objective is
bound to be undercut by pressures for political patronage on one hand,
and the need to keep tolls low enough to continue to attract shipping
on the other.
This last requires additional comment. Changes in shipping
technologies-for example, double-stacking of CONEX containers on
railroad cars across the U.S. and Canada--now make the Canal less vital
than in the past. Even for certain types of high-value, low-volume
products air shipment is competitive. For products like oil, trade-offs
between Pacific and Atlantic producers can dispense with inter-isthmian
traffic altogether if necessary. In effect, the Canal is not the
transoceanic monopoly it once was.
Environment. Panama's stewardship of its environment is crucial to
the continued competitiveness of the Canal. This is so because water
shortages in the Central Lake will lead to delays, and for every day
that ships are backed up in a line waiting to use the facility, the
unit cost of shipping each item rises. Water shortages will also create
serious problems for city-dwellers, who now constitute more than 50
percent of Panama's population.
Unfortunately, the environment has been given short shrift in
Panama. The entire ecosystem of the Chagres river basin has been
steadily deteriorating since 1978, when the area was turned over (along
with the rest of the old Canal Zone) to Panama. An unrestrained
invasion of peasants practicing slash-and burn agriculture has
drastically reduced the forested area, and by some estimates will
denude it entirely by the end of the next century. Deforestation has a
negative effect on rainfall, and even more important, fosters erosion
and build-up of sediment in the lakes, which in turn creates problems
for navigation.
The Panamanian government has recently undertaken to
institutionalize its environmental concerns. On the other hand, like
all other government agencies, the Panamanian environmental
organization INRENARE, is a patronage machine, staffed with political
appointees, many of whom are utterly unqualified for their work.
Several qualified environmentalists have been discharged for political
reasons.
There is no intrinsic reason that Panama cannot redress
deficiencies in all three areas--maintenance, management and
environment, but it must make up for an entire lost decade--the 1980s--
and accelerate actions taken since the ouster of General Noriega. This
in turn requires a change in the country's political culture, and a new
respect for professionalism, insulation from partisan pressures, and
rigorous attention to the bottom line.
This may or may not occur. But the interest of the United States in
the efficient operation of the Canal is much less crucial than in the
past, both because of changes in global politics and the emergence of
new shipping technologies. Of course, ideally a well-run Canal is in
everyone's interest-starting with Panama's. But if Panama fails to meet
the challenge, it will not be the end of the world for the
international shipping community or the United States.
Panama's Political Development
At the time of the Carter-Torrijos treaties, Panama was ruled by a
populist military dictatorship. Today it has an elected government and
national assembly, an independent press, and a lively civic life. The
Panamanian army has been abolished and replaced with a national police
on the Costa Rican model. Unfortunately, it remains a deeply divided
society-fractured along political, racial, class, linguistic and
regional lines. Of course this is true for many countries, including
the United States. But it is dangerously true for Panama, which has the
most inegalitarian distribution of income of any Latin American country
except Brazil.
As a result, no political party in Panama can expect to win
anything like 50 percent of the vote. In the 1994 election President
Perez Balladares won 33.3 percent of the vote, which made him the
victor in Panama's first-past-the-post system. But his opponent, Mireya
Moscoso of the Arnulfista party, garnered 29.1 percent-nearly as much.
Salsa singer Ruben Blades of the new Papa Egoro party won 17 percent,
and Ruben Dario Carles of the MOLIRENA party won 16 percent,
respectively.
Not all parties in Panama are alike. Perez Balladares' Democratic
Revolutionary Party is the successor to the Torrijos-Noriega
dictatorship, and although it has greatly improved its behavior since
1990, still polarizes Panamanian opinion. Other parties, particularly
the Arnulfistas and MOLIRENA, feel (not wholly without reason) that the
PRD still harbors many anti-democratic elements. Indeed, they are not
slow to suggest that rather than a party in the ordinary sense, it is a
collection of thugs who believe that they alone have the right to
govern the country, by fair means or foul. For example, many members of
these two opposition parties believe that the PRD rigged the 1978
plebiscite on the Canal, and they also believe that in the upcoming
referendum on constitutional reform, electoral fraud is genuinely
possible.
Recognizing these divisions, and also the limitations of his own
electoral score, following his election President Perez Balladares
reached out to the opposition and tried to incorporate as many of its
members as he could in his new administration. For reasons of their
own, the Arnulfistas, Panama's second largest party, chose not to
accept his offer.
Meanwhile, as his term has worn on, Perez Balladares has been
increasingly deferred to the less respectable elements of his own party
in order to consolidate support for a constitutional amendment which
would allow him to run for another term. One example is the appointment
of Jorge Ritter as minister of canal affairs; another is the curious
composition of the Canal Authority. Even more troubling, in recent
weeks there has been a coarsening of political discourse. when former
Vice-President Ricardo Arias Calder6n, a Christian Democrat and a
political figure of unmatched integrity, recently suggested that it
would not be a good idea to change the rules so as to allow consecutive
presidential terms, PRD leader Mitchell Doens suggested that Dr. Arias
Calderon needed ``a political Viagra to bring him into line with the
new times in which we are living.'' The Electoral Tribunal recently
overturned a measure which would have required newspapers to submit all
public opinion polls to prior censorship.
Panama's democratic political culture is extremely fragile and
needs nurturing. While a second presidential term in and of itself need
not threaten democratic institutionality, given Panama's troubled past,
and the role which the PRD has played in propping up military
dictatorships, continuismo of the type contemplated by President Perez
Balladares may not be the best solution. Panamanian political life has
been plagued by sectarianism, intolerance, random violence, and
intemperate discourse--it needs a healthy dose of what Latin Americans
call alternancia to strengthen the forces of moderation, pragmatism,
and good sense.
U.S. Interests in the Isthmus
Security of the Canal. At the time of the ratification of the Canal
treaties, some legitimate U.S. security concerns were raised by members
of the Senate and the general public. These were understandable in the
context of the times. They have been largely addressed by the
Neutrality Treaty, which assures that the facility will remain ``secure
and open to peaceful transit by vessels of all nations on terms of
entire equality.'' (Article II). The United States is also guaranteed
``expeditious passage'' of its ships through the Canal in time of war--
that is, that its ships will be allowed to go to the head of the line.
(Article VI).
The Neutrality Treaty has generally been construed, in the United
States at least, as giving our country the right to forcibly intervene
militarily to keep the Canal open if necessary. This was one of the
pretexts used to justify our intervention in 1989. However, as many
Panamanian politicians have pointed out, whether the United States does
or does not have that right, if it wants to it will intervene anyway.
Certainly we retain the capacity to do so, whether we or not we are
physically present in the isthmus.
The United States has been extraordinarily lucky in the years since
ratification. Our only serious global adversary, the Soviet Union, has
disappeared, and the political environment in the circum-Caribbean is
significantly more favorable to us now than twenty years ago. Among
other things, Fidel Castro's Cuba is in rapid decomposition, and all of
the countries of the basin, including Panama, are anxious to become
part of the NAFTA community of nations.
Further, no country in the world has a greater interest in keeping
the Canal open than the Republic of Panama. This was as true twenty
years ago as today. It is perhaps worth noting that the only time the
facility has ever been shut down in its more than eighty year history
was the day after the U.S. invasion in December 1989--and by action of
the U.S. military.
Other security considerations. There are other security
considerations in Panama, but they are marginal to the Canal itself.
The biggest problem is the porous nature of the country's southern
border, where the province of Darien meets Colombia's Choco province.
The latter is a wild, sparsely populated area, home to clandestine drug
labs and airfields. According to Panamanian law-enforcement officials,
since 1988 Colombian drug traffickers have been smuggling their
product--as well as millions of dollars in cash-through Puerto Abadia
in Darien for transshipment through Panama or laundering through
Panamanian banks.
Further, clashes between Colombian paramilitary groups and rebels
on Panamanian soil are taking place with increasing frequency, with
local authorities powerless to do anything about it. Indeed, by the
summer of last year the situation had become so serious that Panamanian
authorities were granting permission for Colombian Army troops to camp
in Darien province and conduct operations against rebels who had taken
refuge there.
These developments are all the more troubling in light of the fact
that Panama no longer has an army. The national police agencies are
still struggling to find their professional feet. No matter what
happens, however, the United States is not going to have the kind of
military presence in Panama which would equip it to defend the
country's frontiers or engage in hot pursuit of drug dealers.
U.S. military presence in Panama. Under the Carter-Torrijos
treaties the United States is obliged to liquidate the totality of its
military presence in the country by the last day of 1999. We are
actually slightly ahead in this process, from a high of 12,000 in 1990
to 4,000 today. We are moving very expeditiously as well to turn over
some 7,000 buildings on what used to be U.S. military bases.
At the time the Carter-Torrijos treaties were negotiated, Panama
would not hear of any residual U.S. military presence in the country.
For many years thereafter, however, various public opinion polls showed
that a decisive majority of Panamanians (usually around 70 percent) did
not favor the departure of the U.S. military. Indeed, some polls even
reflected a strong majority in favor of the U.S. remaining in Panama to
run the Canal, jointly with the Panamanians or even on its own! In
recent years-that is, since President Perez Balladares took office in
1994--Panamanian enthusiasm for a residual U.S. military presence has
been somewhat tempered by the realization that we were not prepared to
pay for the privilege of remaining.
The bases issue dramatically illustrates the disconnect between
Panamanian opinion and Panamanian politics. During all the years that
ordinary Panamanians were telling pollsters that they wanted the U.S.
military to stay, the politicians were each accusing the other of
secretly conspiring--oh horrors!--to respond to majority opinion. On
the other hand, it must be admitted that the political class did an
excellent job of convincing the public that the United States should
have to pay for the privilege of remaining in the country--as if $250
to $500 million a year thrown into the local economy by American
military personnel was just so much spare change.
The Panamanian political class greatly overestimated the country's
importance, particularly in the light of the end of the Cold War, and
played its cards badly on this issue. The U.S. refused to be
blackmailed, and any further discussion of a residual base presence
came to an end.
The Multinational Counternarcotics Center. Once the Panamanians
realized that the U.S. military was definitely leaving the country,
panic set in, particularly in the circles of the wealthy elite and the
political class. As one business delegation explained to me, in their
visits to Western Europe they found that potential investors were
interested only in one thing--would the United States continue to be
present in Panama. With the closing of the bases, some sort of
mousetrap had to be found.
Our concern with narcotics nicely meshed with the need of Panama's
elite to retain some sort of symbolic U.S. military presence. This
convergence of needs explains the current plan to construct a
Multinational Counternarcotics Center at Fort Howard, run by civilians
and drawing on representatives of the United States and a number of
Latin American countries. A framework agreement was announced on
Christmas Day 1997, but American and Panamanian negotiators have had
considerable difficulty thrashing out the final details.
The MCC poses a number of serious problems which this Committee
should carefully consider.
1. The ``multilaterality'' will be largely fictitious.
Although President Perez Balladares likes to talk about
complements from Argentina, Brazil, Peru, Colombia and Mexico,
there is strong opposition to participation in many of these
countries (it is overwhelming in Mexico), so that the
overwhelming majority of military personnel would be from the
United States.
2. Such a center would require a new treaty. No doubt the
Clinton administration would prefer an executive agreement, but
this would contravene Article V of the Neutrality Treaty, which
states unambiguously that ``after the termination of the Panama
Canal Treaty, only the Republic of Panama shall . . . maintain
military forces, defense sites, and military installations
within its national territory.''
In my own view, the Senate should require the Clinton
administration to subject any residual US. military presence in
Panama--under whatever label--to this restriction, and then
force the treaty to run the gauntlet of ratification.
3. Neither the United Nations nor the Organization of
American States nor any other international actor has offered
to loan the center its flag; the best that President Perez
Balladares can lamely offer is a committee of foreign ministers
of participating countries, headed by his own, to supervise the
activities of the Center. As far as the United States is
concerned, this begs crucial questions of command, control, and
safety of American personnel and their families. \2\
---------------------------------------------------------------------------
\2\ The question of safety is not a frivolous one. Shortly before
President George Bush's visit to Panama in 1991, two American soldiers
were murdered in cold blood by Pedro Miguel Gonzalez, son of the
president of the Democratic Revolutionary Party. Despite eyewitnesses,
no Panamanian court felt capable of establishing his guilt. Miami
Herald, October 23,1997. At this writing Mr. Gonzalez is a candidate
for congress on the PRD ticket.
---------------------------------------------------------------------------
4. As envisaged by Panama, the Center will be a permanent
object of controversy. Nobody will believe in its
multilaterality-indeed, that is precisely what Panama hopes.
(All foreign investors will read it as a largely American
enterprise, which what it will be, but without the advantages
of our outright basing agreements with Spain, Italy, Germany
and Japan.) However, it will be an open sore in Panamanian
politics, with agitators insisting that it is "really" an
American base and demanding its removal. The fact that Panama
wants to extend facilities in three year increments almost
certainly builds in political problems, with anti-U.S.
agitation returning promptly in the second year of each cycle.
I personally believe that U.S. interests are better served by a
rigorous adherence to the Carter-Torrijos treaties, and a complete and
total withdrawal of our military forces from the country. If we need to
accomplish certain missions related to narcotics trafficking, these
would be best carried out from our own territory.
But if we are to have a residual military presence in Panama--under
whatever label--Panama must first ask for it by name, rank and serial
number, and then submit the decision to a plebiscite. There must be no
ambiguity, no pretense. No one in Panama must ever be able to say that
American troops were introduced into the country through the back door
or against the will of the people. And, as I have said above, a new
treaty with appropriate status-of-forces agreements must be negotiated,
signed, and sent to this distinguished body for ratification. Anything
else is a disservice to the U.S. national interest.
The Chairman. Thank you, sir.
Dr. Pastor.
STATEMENT OF DR. ROBERT A. PASTOR, DIRECTOR, LATIN AMERICAN AND
CARIBBEAN PROGRAM, THE CARTER CENTER, ATLANTA, GEORGIA
Dr. Pastor. Thank you very much, Mr. Chairman and Senator
Dodd, for inviting me to testify. It is a moment for which I
have been waiting for many years, and it is an important moment
to evaluate the status of the transition in Panama. So I
applaud you for holding these hearings.
Twenty years ago when the Senate approved the treaties, the
transfer of the canal seemed very far off, but it is upon us
now. We have not used these past 20 years well. Just about half
of all of the buildings, the bases, and the land have been
transferred, leaving the other half to be transferred in just
18 months. Most of that transfer, incidentally, has occurred in
the last 3 years. We are in the middle of a negotiation which
appears aimless on the Multinational Counternarcotics Center.
The 23 years could have been used much more wisely to
assure a more stable and gradual transition. Instead, I think
the late reversion of the properties has introduced a certain
amount of uncertainty.
You have my statement, which I appreciate your putting into
the record. Let me just summarize it very briefly so that you
have time for questions.
The transfer can be an important moment for our country
that will make us proud of the canal's construction and our
contribution in Panama. But the first and most important thing
is to focus on our interests. Then, let me offer some
recommendations.
There are three broad interests at stake. First, we
maintain an interest in an open and secure Panama Canal.
Second, we have an interest in a democratic and prosperous
Panama. Third, we have an interest in relating to Panama,
because of its history and our relationship with Panama, in a
manner that could further our other interests in Latin America.
These three interests are endangered by an unstable
transition that might happen and that could endanger all of
these interests. In fact, there are three different
transitions. The first is the transition to Panama of the
operation and administration of the canal. That, fortunately,
is working very well. The Panamanians today account for 92
percent of the people running and managing the canal. They have
passed a new law. They have an effective administrator.
The second transition is on the reversion of property and,
as I said, the schedule of that reversion is now concentrated
in a manner that could introduce uncertainty in the next 18
months, just when we most need stability.
Finally, there is the question of the defense of the canal.
As a result of General Noriega and of Operation Just Cause,
there is considerable insecurity on the part of Panama and,
whereas the majority of the Panamanians in the 1970's were very
much in favor of a full transfer, as Dr. Falcoff has pointed
out, of the canal to Panama, that changed. Now about 70 percent
or more of the Panamanians would like some United States
presence to remain, and the shift in opinion is a result of
those events at the turn of this last decade. At the same time
there is a very intense minority in Panama who feel that the
United States should leave.
The United States, on the other hand, has gone from an
obsession to keep the Panama Canal to a situation in which we
seem disinterested. Therefore, I applaud you holding these
hearings, because I do not see the kind of high level attention
that is required at this critical moment.
I would say the Panamanian ambivalence is understandable,
given the importance of this issue in Panamanian politics. U.S.
disinterest and its shortsighted, very bureaucratic approach to
the issues that are on the table is, in my judgment,
deplorable. It is time, in my judgment, for the President to
focus on the issue, to define the U.S. national security
interests, and to authorize his negotiators to complete an
agreement as soon as possible.
Let me conclude with two broad sets of recommendations.
U.S. national interests at this point require that we lend our
influence to making this 18-month transition work, making it as
smooth as possible. Unfortunately, I think we are doing the
opposite right now. I think it is too late to introduce the
discussion of military bases. That moment passed a couple of
years ago. It is not too late to complete the negotiations for
the MCC.
But we need to keep our focus, not on some very limited
issues that have been raised recently, in my judgment, such as
the duration of the agreement. The Panamanians have suggested a
3- to 5-year period. This corresponds with the ideas of sunset
provisions that the Congress has championed in the United
States. Three years after the year 2000, both the United States
and Panama can evaluate whether the Multinational
Counternarcotics Center is working, and if it is then it can be
extended. If it is not, it still would have served a very
effective purpose of assuring that this transition from United
States to Panamanian control will be a little bit more stable
than it would have been in the absence of such an agreement or
in the continuation of negotiations.
So I would recommend first that the President does
authorize his negotiators to complete the agreement
expeditiously, that he help Americans understand that we have a
stake in facilitating a smooth transfer of authority to Panama,
that the MCC in my judgment will do that, while also helping us
forge a possible collaborative effort with Latin America
against narcotraffickers in a rather novel enterprise.
Finally and most importantly, we need to leave the bases as
clean and free of ordnance and contamination as we do in the
United States. We should leave in a proud way. We should make
sure that we hold to the same standards in Panama as we do when
we close a base in the United States. That does not appear to
be the case right now.
The Senate has always played a very important role in
Panama and in the treaties, and I would recommend that you, Mr.
Chairman and Senator Dodd, take the lead in introducing a
resolution that would make four points:
First, it would reaffirm America's commitment to fulfill
its obligations under the Panama Canal Treaties.
Second, it offers United States support during this very
delicate and uncertain transition to Panamanian control. It
will serve all of our long-term interests if we do that.
Third, you recommend a Multinational Counternarcotics
Center of any duration and with a fixed mission, to focus on
the mission of counternarcotics.
And finally, that the United States and Panama work
together to create a climate that will encourage needed
investment in both Panama and the canal area, so as to assure
that Panama does have the capability to manage itself and its
affairs in the years to come.
In conclusion, Mr. Chairman, 100 years ago, America
conceived of and built a remarkable technological feat. Twenty
years ago, we recognized that the best way to secure the canal
was to transform our relationship with Panama from one with a
resentful neighbor to one with a cooperative, respectful
partner. I think we have secured the canal by doing that.
Today we have a different responsibility and it is to make
sure that the transfer in 18 months is done with dignity,
stability, efficiency, and respect. To accomplish that, the
President and the Senate should act now.
Thank you.
[The prepared statement of Dr. Pastor follows:]
Prepared Statement of Dr. Robert Pastor
Mr. Chairman, I appreciate your Committee's invitation to speak on
the transition from U.S. to Panamanian operation of the Canal that will
be completed on December 31, 1999. I applaud your Committee's decision
to hold hearings now.
Two symbols of our country's greatness can be found in the
construction of the Canal, one of the world's great technological
feats, and in the 1977 Panama Canal Treaties. The turn-of-the-century
technology that lifts and lowers each ship 85 feet still works; indeed,
the Canal is as busy as ever. American leadership, however, is not just
based on our economic, military, and technological prowess, it rests on
our ideals and our ability to adapt to changes in the world. Beginning
in the 1960s, four U.S. Administrations--two Republican and two
Democrat--understood that we needed a new relationship with Panama on
the Canal if we were to retain the respect and support of Latin America
and keep the Canal secure. The best defense of the Canal were new
treaties that changed Panama from a resentful neighbor to a respectful
partner. We are fortunate that President Jimmy Carter and 68 Senators
from both parties had the courage to negotiate and approve the
treaties.
Just as we needed to adapt in the 1970s to a world in which smaller
nations demanded and deserved respect, so today do we need to adapt to
the changes that have occurred in Panama and the world since the
treaties were ratified. Neither the U.S. nor Panama have used the past
20 years wisely in preparing a stable transition, and current
negotiations for a Multilateral Counternarcotics Center are being
handled ineptly and indecisively. Thus our interests in a smooth
transition are endangered. We should delay no longer. Both President
Clinton and the Senate need to move quickly and boldly to ensure a
sturdy transition. Specifically, I recommend:
The President should authorize his negotiators to conclude
an agreement expeditiously that would reflect our long-term,
national interests in Panama, the Canal, Latin America, and
against drug-trafficking.
At the same time, the Senate should reaffirm our nation's
commitment to fully implementing the Panama Canal Treaties and
to respecting Panama as a sovereign partner. The Senate should
insist that the Defense Department clean up its bases at least
as well as it does when it closes a base in the United States.
Finally, Congress should consider new ways for the United
States to work with Panama to help it attract needed
investment.
Let me first describe U.S. interests, then the changes that have
occurred, and finally develop these recommendations.
I. U.S. Interests
The United States has three sets of interests as they relate to
Panama and the Canal. First, the United States has an interest in a
secure, efficient, and open Canal. Second, we have an interest in a
prosperous and democratic Panama. And finally, we have an interest in
relating to Panama in a manner that strengthens our relationships in
Latin America and enhances our ability to pursue our interests in the
hemisphere.
With almost all of Latin America now democratic, we have new
opportunities for creative cooperation. One critical area is counter-
narcotics, and Panama has offered the use of the airport at Ft. Howard
in the Canal area as a Multilateral Counter-Narcotics Center (NCC).
This idea emerged after the U.S. and Panama failed to agree on
compensation for bases that could be used after the year 2000.
Nonetheless, it is an imaginative way to generate inter-American
cooperation on an issue that demands it, and in a way that also could
provide some stability to Panama's transition.
Our three interests are endangered by an unstable transition, and
that might happen if we don't reach agreement with Panama soon.
II. Old Assumptions and New Realities
Actually, there are three transitions. The first--the operation and
the administration of the Panama Canal--is fortunately doing well. More
than 92 percent of all Canal employees are Panamanians, the new
Administrator is competent, and the government has just established the
authority to manage the Canal. There was some concern two decades ago
that the Panamanians could not operate the Canal; few people now
believe that.
The second transition regards the reversion of properties, and that
has been disgraceful. Just three years ago, only about 10 percent of
the 5,000 buildings, 20 percent of the land, and few of the bases had
been transferred to Panama. The two governments then began to rush.
Today, 20 years after the treaty, roughly half of all bases and
buildings managed by the United States in the Canal area have been
transferred, leaving the other half to be turned over in the final 18
months. This is a dismal record.
Some of the bases contain hazardous materials, including unexploded
ordinance and contaminated fuel. Thus far, the Pentagon seems to hope
that no one.will notice, but no American community would tolerate this.
This behavior soils a proud legacy. We should clean up the bases just
as we do in the United States.
The third transition regards the defense of the Canal. When the
United States negotiated the treaties, the assumption was that Panama's
Defense Forces would assume principal responsibility for the defense of
the Canal, but these forces were abolished after ``Operation Just
Cause.'' The United States, of course, retains the independent right to
defend the Canal.
In large part because of General Manuel Noriega and the U.S.
invasion, Panamanian public attitudes toward a post-2000 U.S. presence
changed. The majority that opposed a U.S. military presence in 1978 now
seem to favor some U.S. presence today. But an articulate and intense
minority oppose it, and many of those are in the party of the
Panamanian President so the Panamanian government has been ambivalent
and divided on the issue.
The United States, on the other hand, seems to have gone from
obsessed with staying in Panama to being disinterested. The Pentagon
evidently believed that it was not very important to remain in its
bases and therefore wasn't prepared to offer any compensation.
Negotiations today seem driven by two groups--those responsible for the
anti-drug war and those who would like to use Ft. Howard for other
missions in Latin America. As a result, the U.S. seems about to repeat
the mistake it made in the first round of talks in 1995-96--inducing
uncertainty rather than stability.
Panamanian ambivalence is understandable; U.S. disinterest and its
myopic, bureaucratic approach is deplorable. It's time for the
President to focus on the issue, define U.S. national interests, and
authorize his negotiators to complete an agreement immediately.
III. Recommendations
During treaty negotiations, the United States did not focus on the
simultaneous transfer of both the Canal's operation and its defense
because plenty of time was allowed for the gradual transfer of both
functions to Panama, and the abolition of Panama's Defense Forces was
not envisaged. It is clear that many Panamanians and world shippers are
nervous about the simultaneous transfer, and the rapid reversion of
properties could add to the uncertainty.
Panama can operate the Canal, but the government's ability to
attract needed investments and make effective use of the properties
depends greatly on political stability and economic development during
the next five years. The U.S. national interest requires that we lend
our influence to making the transition work. We are doing the opposite
right now.
It is too late to talk about maintaining military bases in Panama;
the mere suggestion of it at this time would have a negative political
effect in Panama, thereby undermining our own interests in a stable
transition. It is not too late, however, to reach agreement on an MCC,
but we need to resolve at least two outstanding issues--both of which
seem to be driven by a narrow, short-term bureaucratic slice of U.S.
interests.
First regarding the duration of an agreement, I understand that the
Pentagon wants to stay at Ft. Howard for 15 years, and Panama would
like a trial period of about 3 years (or 5 from now). Congress often
establishes sunset provisions on new programs, and the MCC is a new
idea that perhaps should be tested before given a long term. Even if
the MCC does not work to curb narcotics-trafficking, it will have
furthered U.S. national interests if it provides 3-5 years of stability
during the transition.
The second issue is whether the United States should be able to use
Ft. Howard for other reasons than those related to anti-narcotics
trafficking. If the center is going to be genuinely multilateral, then
we need to keep a focus on its principal mission, lest other countries
also raise additional missions. Panama is correctly concerned that the
U.S. will use the agreement to continue its military presence as if the
Canal Treaties had never been approved. Again, let's keep our focus:
let's support an MCC because it could help against drugs, and it will
add some stability to an uneasy transition.
So, in brief, I recommend that the President define the U.S.
national interest in a manner that will help Americans understand we
have a stake in facilitating a smooth transfer of authority to Panama
to operate and defend the Canal. An MCC will help us do that, and at
the same time, it could provide a vehicle for forging modern,
collaborative relationships with our Latin American neighbors against
drug trafficking.
The Senate always has played a role in shaping U.S. policy toward
Panama, and it's role today remains important. I would encourage this
Committee to introduce a resolution that: (1) reaffirms U.S.
commitments to the Canal Treaties; (2) lends support for a peaceful,
stable transition; (3) recommends an MCC of any duration and with a
focused anti-drug mission; and (4) works with Panama to create a
climate that will encourage needed investment in the country and
especially the Canal area.
One hundred years ago, America emerged from isolation and conceived
and built a Canal. Twenty years ago, we recognized that the best way to
secure the Canal was to modernize our relationship with Panama. Today,
we have a responsibility to make sure that the transfer in 18 months is
done with dignity, stability, efficiency, and respect. To accomplish
that, the President and the Senate need to act now.
The Chairman. Thank you very much.
The chair is going to exercise a point of personal
privilege to recognize two great Americans--we all know them--
whose names will be a part of history, whether they know it or
not. One of them is John Singlaub, General Singlaub. Stand up,
if you will. We welcome you here this morning. And Admiral
Clarence Hill. The same goes for you, sir. I have followed your
career for years and years and years. I thank you for what you
have meant to our country.
Now, Chris, with two this is a situation of luxury as far
as time is concerned. Suppose we each of us take 10 minutes.
Senator Dodd. You take whatever time you like.
The Chairman. No, I want you to go first. But I have got
some questions that I want to ask, and I know you have, too.
Senator Dodd. Well, thank you very much, Mr. Chairman. I
thank our witnesses again for your testimony here this morning.
Mr. Falcoff, let me just begin. I appreciate your
testimony. I am curious, though. Maybe you have a different
interpretation than I do, but you quote article 5 of the
neutrality treaty that prohibits United States troops in Panama
absent a new treaty.
Dr. Falcoff. Well, no. It says that no country but Panama
may maintain troops, military installations, and so forth in
Panama after the consummation of Carter-Torrijos, which of
course would be the last day of next year.
Senator Dodd. We attached a condition, the Senate did.
Dr. Falcoff. That is right, there were protocols.
Senator Dodd. Right, and it says there: ``Nothing in the
treaty shall preclude the Republic of Panama and the United
States from making, in accordance with their respective
constitutional processes, any agreement or arrangement between
the two countries to facilitate performance at any time after
December 31, 1999, of their responsibilities to maintain the
regime of neutrality established in the treaty, including
agreements or arrangements for the stationing of any United
States military forces or the maintenance of defense sites
after that date in the Republic of Panama that the Republic of
Panama and the United States of America may deem necessary or
appropriate.''
It seems to me there that the necessity for a treaty would
not be required. This was a very important condition, which I
am confident the chairman has a far better recollection than I
do of that part. It was a very important element to securing
some of the additional votes, as I recall, that would not have
occurred, and the treaty probably would not have been ratified
had that condition, Senate condition, not been added.
Dr. Falcoff. Well, of course at the end of a negotiation
you never foreclose the possibility of a new negotiation once
the contract has run out. That is obvious.
You are focusing on the treaty aspect. I am not a lawyer.
You will have to get one of your lawyers to tell you.
Senator Dodd. I do not want to dwell on that.
Dr. Falcoff. I think, though, Senator, as an American
citizen I would wish to see this new U.S. relationship
enshrined in a treaty, because a treaty would therefore require
very thorough investigation by this body and I believe that is
desirable.
Senator Dodd. Well, that is a different point and it is a
very meritorious point. But I did not want to leave the
impression here that the treaties themselves would have
precluded the presence of U.S. military forces.
Dr. Falcoff. Unless a new agreement is made.
Senator Dodd. And agreement and a treaty are different
things.
Dr. Falcoff. As we stand now, it does.
Senator Dodd. But that is different than going through a
ratification process for a treaty. An agreement could be
reached without having to go through----
Dr. Falcoff. Well, that is right. But as I said in my
testimony, I am nervous about executive agreements.
Senator Dodd. I understand that. I appreciate that. And I
think, by the way, I am not disagreeing with your point. I
think these arrangements, they are better, they have greater
solidity, if in fact they are reached. Speaking for the
legislative branch here, you will find that we oftentimes raise
concerns about the fact that agreements are reached and we are
disregarded or not included in the process. Obviously, I think
it is very, very helpful--John Glenn likes to offer the
analogy, better to be involved with the takeoff as well as the
landings. Certainly the admirals here will appreciate that
analogy as well.
Let me as well--and Admiral, again, we thank you immensely
for your presence here today. I was curious, and the chairman
has already commented on this a bit, but you may want to
comment some more on it. I was interested in your concerns
being raised by the presence of Asian business interests in
operating the privatization of some of these port facilities.
The committee, the staff of the committee here, has made an
assessment of this, as you pointed out, I think, in a 1997
report where this issue has been raised. The committee staff
points out, I think with a degree of appropriateness here, the
economic concerns about this, the monopolistic concerns, the
absence of bidding, for instance, that we would normally
anticipate where leases or privatization were to occur, that
there would be an opportunity for others to participate in
that.
But I think the major findings of the report--and they are
in here. You can read this if you care to. But: ``The
controversy surrounding bidding on recently privatized
Panamanian ports, to include the awarding of the contract to
the Hong Kong group, Hutchison Port Holdings, is more about
international business in a small country than about strategic
geopolitics.'' I am reading, quoting from the report here that
Senator Helms' committee staff has put together.
Again, I am not reading all of it here and there are parts
in this report where they do raise concerns here. They are not
without concerns here, but in terms of the geopolitical nature
of these concerns, it seems to be more of a reference here to
that aspect. I will not go into all of it here, but there are a
number of places where this issue is raised.
I presume you read this or saw this or someone here within
the group here read over the report, and you may want to
respond to this. I do not want to just lay it out here. You may
have a different point of view. I am not suggesting this is
Biblical, what we have written here, what is written by the
staff report. But it is the conclusion here that it is more of
an economic concern rather than a geopolitical one. You find
that through this report. At least that is the conclusion I
reach.
Do you have any comment on that?
Admiral Moorer. Well, my main interest in coming here has
to do with the Chinese, and certainly the Chinese when it comes
to trade, I think by and large that is what this is all about
in their minds. I notice neither one of these two gentlemen
used the word ``China'' in their statements.
The idea of having the Panamanian Government allocate to
this Chinese company the rights and authorities and so on,
which means that they have practically taken over the canal--as
a matter of fact, they have already designated one of the
properties they acquired as their trade center. So I will leave
this with you, Senator: If we get in a big war, whether we have
the canal or not, we have to take it.
Senator Dodd. Thank you very much. That report, I will just
ask, Mr. Chairman, some of the report's conclusions here
regarding this point be included, some of the quotes here. All
these interviews, speaking about people who were involved in
this, this report: ``The Chinese-owned companies' development
of the two ports does not translate into a direct national
security threat to the Panama Canal.'' I am just quoting it. It
further states: ``The controversy surrounding the bidding''--I
read that one--``is more about international business,'' which
is not insignificant.
I do not mean to minimize it. I think trade is very
important and clearly going to be a major issue for us in the
twenty first century, with a country of that size and capacity.
But I think it is worthy to note here those particular points.
Mr. Pastor, we appreciate your coming back here. Let me
ask--in fact, let me ask all three of the witnesses. The
treaties have been in effect now for 20 years. And I think,
Admiral, you have probably answered this already. In
retrospect--and Dr. Falcoff as well--do you believe that these
treaties have furthered the interests overall of the United
States or harmed U.S. interests, with the ability of 20-20
hindsight?
Dr. Falcoff. You are asking me, Senator?
Senator Dodd. Yes.
Dr. Falcoff. I think we were very lucky. We took a gamble
in 1978. The world was a very different place. I think it was a
more dangerous place for us. And for reasons we could not have
predicted, the international geopolitical situation changed
radically and we came out smelling like a rose.
I do not think the same could be said for Panama. Panama
took a gamble, too. They are now stuck with the task of making
this work and they will have to do it. I hope they will be able
to do it. But whether they can do it or whether they cannot do
it, I think we came out ahead.
Senator Dodd. So, by and large?
Dr. Falcoff. I think on balance the outcome has been
favorable to us. I supported the treaties in 1977-78, by the
way.
Senator Dodd. You can change your view.
Dr. Falcoff. No. Twenty years later, I feel that history
has ratified what was admittedly a risky decision at the time.
Senator Dodd. Bob, other than the implementation on which
you have raised the issue?
Dr. Pastor. Yes. The hard part of questions like yours is
what academics call the counterfactual. We cannot really say
what would it have been like if we had not done it. But our
judgment at the time--and it has been confirmed subsequently
through a variety of sources, including Noriega's memoirs, was
that the best way to protect the canal, the best way to build
good relations with Latin America, was to modernize our
relationship with Panama.
One of the reasons perhaps that the Panamanians have a more
positive view toward the United States today was that the
treaties showed we respected them as a small nation, able to
take over such a large task, because it is a task that is vital
to them.
Now, I agree with Mark, we do not know how well they will
do, although frankly I think they will do well in managing the
canal, because they understand its importance, and they have
some very talented people there.
Senator Dodd. Admiral, I want to give you a chance to
respond. I think you did in your statement. But is it your
view, with 20-20 hindsight, have these treaties helped or
harmed U.S. interests?
Admiral Moorer. Helped or harmed who?
Senator Dodd. U.S. interests. With 20 years hindsight,
knowing how you felt about the treaties 20 years ago,
understanding what the world looked like 20 years ago, in
retrospect, putting aside the concerns you have raised about
the recent issues involving ports, do you think the treaties
have helped or harmed U.S. interests?
Admiral Moorer. Well, I think it harmed U.S. interests. I
think that on several occasions where we have had combat
action, in Desert Storm in Iran, in Vietnam, and so on, we have
had to transfer a tremendous amount of material back and forth
from one ocean to another. We would have to make significant
increases in our military structure in terms of size if we were
denied the right and the opportunity to pass back and forth
through that canal.
I think the figure is something like 94 ships are required
to concentrate in the Atlantic or turn around and concentrate
in the Pacific. So I think that I would point out to you that
during the Bush Administration when the situation got so bad in
Panama with Noriega and company, we went in there with troops.
We lost, 26 boys were killed. And if we are going to have to go
in there every time the thing gets unacceptable, I would say
that the treaties generated that requirement and so I think
they harmed us.
Senator Dodd. Thank you.
Mr. Chairman, my time is up.
The Chairman. Thank you, sir.
I think I have a confession to make. I may as well make it
publicly. Two or three people in the media have referred to it,
perhaps jokingly. But you know who my number one adviser on
this matter is? Mr. Noriega--who was born in Kansas, by the
way.
I am interested that no emphasis has been placed by any of
you on the effects on the Panamanian economy with the
withdrawal of the troops. What is it going to be? I get a
different story than some of you apparently have. People come
to my office with some regularity from Panama. I have some
friends, and I had an enemy down there, named Noriega. But what
would the economic consequences be when the withdrawal is
completed? Anybody want to tackle that? Yes, sir?
Dr. Falcoff. Well, I think inevitably it will affect a
number--it already is affecting a number of industries,
particularly hotels and restaurants and stores. Those of you
who have been to Panama and maybe stayed in the downtown hotels
in the past years know that most of the people in the hotels
were United States military and their families waiting for
permanent housing. There has to be an impact when you had
12,000 troops and their families there pouring money into the
economy.
Panama does have a fairly high unemployment rate for a
country of its level of development, and now President Perez
Balladares has talked about or is suspected of wanting to
modernize the canal administration, and there already are labor
problems developing because there is a fear, I do not know how
well justified, that if he is able to win a second term he is
going to fire a large number of canal employees to try to keep
expenses down.
But getting back to your point about the withdrawal of the
United States, this of course poses an important challenge for
the Panamanian Government and the Panamanian business
community, to find new enterprises and new activities that will
bring in foreign investment in very large amounts to absorb
that $250 to $500 million that used to be put in by the
American military. Some contracts have been signed and some
plans are afoot, for example, to turn Fort Amador into a
tourist resort. There is talk of converting some U.S. military
installations into condominiums. There is talk of modified
cruise facilities to increase Panama's tourist potential, which
is very considerable.
I think Panama has many possibilities to, with the proper
management and proper incentives to foreign and domestic
business, to easily replicate the $500 million that the U.S.
military poured into the country. But it will not happen
overnight and it may not happen at all. But certainly the
possibilities are there, and I think that explains the
nervousness of a lot of people in Panama about the potential of
a zero United States military presence.
The Chairman. Dr. Pastor, do you anticipate that there is
going to be an early urgent request for foreign aid for Panama
after the withdrawal?
Dr. Pastor. Well, I think that there may be, but I would
not anticipate it would matter as much as the need for Panama
to attract significant investment. I agree with Mark's
analysis. I think the loss of roughly $250 million a year will
have an adverse effect on Panama.
But on the other hand, the canal is an extraordinary
resource. It is not just a great waterway. As a container area,
as a transportation hub, for tourism and eco-tourism, it could
easily rival Costa Rica, which does remarkably well in terms of
tourism. But it requires investment, and that requires some
stability, which is one of the reasons that I would argue, as I
did, for going ahead with the MCC. I think that will add a
little more certainty, a little bit more stability.
I think Mark's concerns are good ones in broad terms. The
original idea of the canal treaties was to turn it all over to
Panama in the year 2000; let them run it completely themselves.
And that was a good idea, but we did not fully anticipate
certain things that have happened since then.
The Chairman. We certainly did not.
Dr. Pastor. We did not anticipate Noriega. We did not
anticipate the abolition of the Panama Defense Forces. And
there is as a result a fair amount of uncertainty, which I
think the MCC could help overcome and get them over this hump.
The Chairman. Who should help them?
Dr. Pastor. With instability during this period----
The Chairman. Who should help them?
Dr. Pastor. The Multinational Counternarcotics Facility
could help assure a certain measure of stability during the
next 3 to 5 years, which could, in effect, assure investors to
come in and replace the funds that United States soldiers would
have spent, but to do it on a more sustaining and a long term
basis, and to help Panama become a Singapore, a great entrepot.
The Chairman. Well, I suggest that such a proposition for
outlay of American taxpayers' funds would not be greeted with
enthusiasm in the Congress of the United States. They better
not count on too much cooperation from the Congress. There
could be a whole lot of debate on that.
Now, when the treaty was signed it was expressly agreed, if
I can find it:
Nothing in the treaty shall preclude the two sides
from making, in accordance with their respective
constitutional processes, any agreement for the
stationing of any U.S. military forces or the
maintenance of defense sites that the two sides deem
necessary or appropriate.
That seemed to me to be an anticipation that this thing
might not work out. Article 5 of the Neutrality Treaty stated
clearly that--here I quote again:
After the termination of the Panama Canal Treaty on
December 31, 1999, only the Republic of Panama shall
operate the canal and maintain military forces, defense
sites, and military installations within its national
territory.
We all know that.
But in the light of all of this, if an agreement is
reached, extending the United States presence in Panama beyond
1999, do you believe that such an agreement should be
considered a new treaty?
Dr. Pastor. I do not see any particular reason why it
should. I think the first provision that you quoted and that
Senator Dodd did before, as I recall, was introduced by Senator
Nunn. And as I recall, the language there does not talk about a
treaty. It talks about an agreement, which suggests that it
does not have to be submitted to the Senate.
I frankly do not think that the MCC as currently being
considered is of the weight that would justify the
deliberations that the Senate undertakes on behalf of a treaty,
and indeed I think there would be some liabilities to doing
that in the sense that debate would be stretched over a period
of time, and it is in our interests to move as expeditiously as
possible to complete the negotiations and implement the
agreement as soon as possible.
Dr. Falcoff. I wonder if I could comment, Senator. Others
are very vain about their books. I wonder if I could just read
a couple sentences of mine about the MCC.
The Chairman. Sure.
Dr. Falcoff. Thank you.
The center would have nothing whatever to do with
factors affecting Panama's success or failure as a
nation. It would not affect the administration of the
canal for good or for ill. It would contribute nothing
to the management of the environment. It would not
replace the Panamanian Army nor play a role in securing
Panama's southern border against drug traffickers. It
would not even be in a position to act effectively in
cases of civil disorder, since the infantry and
military police components would be minimal or
nonexistent. Even the direct economic benefits of the
center would be minimal since it would consist only of
2,000 people, many of them on hardship tours and
therefore unaccompanied by their families.
Now, certainly from a marketing point of view for the
Panamanian Government, such a center would be useful and when
traveling abroad people would not know all the details about
the center, that it would be mostly Air Force personnel, that
they would have a very limited mission. They would just say, we
have American troops in Panama, and it might help them get some
investment by people who do not look very carefully.
But I would be very hesitant to pin much hope for the
stability of Panama on the MCC.
The Chairman. Admiral Moorer, in your excellent statement
you referred two or three times to a matter that seems not to
be troublesome to the administration or many people in
Congress. It is troublesome to me. You referred to the fact
that the Panamanians have provided a contract to a company that
has direct ties to a company in Communist China, which has
direct ties to the government of China.
Now, what details can you add to what you said in your
statement?
Admiral Moorer. Mr. Chairman, from an overall point of
view the Panamanians, undoubtedly swayed by $22 million a year,
have in effect permitted the Chinese government, through an
arrangement of controls and contacts, to for all practical
purposes wind up as the managers of the canal. They have rights
in this agreement with Hutchison, they the Chinese do, to
dispose of any assets to another country if they want to.
I think it is disastrous, and I am amazed that the
Panamanian Government would permit this, what is called Law 5,
to be enacted. And the United States sits here sitting on their
hands and has not done anything about it, either.
Another point I will make in passing. No one has mentioned
the physical condition or the mechanical condition of the
canal.
The Chairman. That was going to be my next question.
Admiral Moorer. Sir?
The Chairman. That was going to be my next question.
Admiral Moorer. I was going to say that while the treaty
was in effect the canal has deteriorated significantly and the
Panamanians do not have the know-how or the funds to keep it in
proper conditions. Somebody is going to have to help them when
it gets to the point it cannot even be operated if it continues
in its deterioration, and maybe the Chinese will do it if they
want to ask them to do it.
The Chairman. Well, San Francisco had about the same
problem with the little deal out there, too.
Chris.
Senator Dodd. Well, thanks, Mr. Chairman.
As I understand it, by the way, the administration is
probably going to do this Multinational Counternarcotics Center
by executive order rather than--executive agreement, excuse me,
which I hope will have a chance, Mr. Chairman, even if it is
done by executive agreement, that we will want to have maybe a
hearing or two just on that, what is involved in it. It seems
to me that, while I am not enthusiastic about going through a
treaty route on the narcotics center, it certainly I think
would be appropriate for us to want to know in more detail how
this is going to work and what would be done.
But I just raise that as what I have been told, anyway.
I want to pick up on the last point the chairman has
raised. It seems to me one of the greatest threats to the
Panama Canal may not be outside political influences, economic
or otherwise, but the condition of the canal itself and
particularly what is happening in Lake Gatun, where the
ecosystems are collapsing. Obviously, the entire canal depends
upon the success of that lake, the tides and so forth, to
provide the amount of water there.
I, having gone back and read David McCullough's Pathways
Between the Seas, you go back and you appreciate the efforts of
the French and so forth who predated our involvement in the
canal and the herculean efforts to build this ditch was
remarkable--it is a great story. But obviously the success of
it is going to depend more on what Mother Nature decides to do
and how we cooperate with Mother Nature and make it possible
for these water supplies to continue to flow freely.
I wonder if you might comment, any of you who are
knowledgeable. I know, doctor, you spent some time talking
about this.
Dr. Falcoff. Yes, I have a section in my book on that.
Senator Dodd. I know you do, yes. It seems to me we may be
talking about a moot issue here, people owning ports and
everything else, and if you cannot get the water into the canal
this thing becomes the ditch again.
Dr. Falcoff. Well, the first thing to say is that every
ship that passes through the canal pushes out 52 million
gallons of fresh water. So that water in the lake has to be
replaced, obviously, for the proper functioning of the canal,
but also to supply the Panamanian cities with fresh drinking
water. Over 50 percent of the population of Panama lives in
cities.
Up to 1978 when the treaties were ratified, one could fly
over the area in a helicopter and see right to the chain link
fences where the U.S. Army authority began, since the effects
of slash and burn agriculture were evident right up to the
barrier. Since 1978 the fences have been removed and slash and
burn agriculture has proceeded apace.
There are differences of opinion, Senator, on just how
serious the ecological crisis in Panama is. However, in going
back and looking at the hearings of this committee in 1977-78,
I was interested to see that this issue was raised at the time.
It was not ignored. It was just that it was kind of swept under
the rug.
Well, now what we have is a situation where, unless
something is done to arrest ecological decline, there will be a
serious water shortage. The politics of environmentalism in
Panama is not encouraging. I could go on on this in great
detail. The book talks about it. The Panamanians understand
they must do something about this and they have said they will.
I hope they will.
But there are alternative shipping technologies available
and the international shipping community has told the
Panamanian Government that if they are not serious about this
effort that this canal will become obsolete indeed.
Senator Dodd. Do you have any sense of this? Maybe it is in
the book, and I do not recall it. But is there some time period
that experts, knowledgeable people looking at just this issue,
would share in terms of how short a time span we are looking at
before, assuming you have a continuation of the slash and burn?
Dr. Falcoff. I quote in the book a couple estimates having
to do with where we are on the environment. But as I say, there
is no--well, I will read you this:
Whereas in 1952 some 85 percent of the Chavez River
basin was covered with forests, by 1983 the figure had
fallen to 30 percent, by some estimates to 20 percent.
I go on to say:
Although there are no accurate figures for the rate
of deforestation, various extrapolations suggest that
the basin may be virtually denuded by the twenty-second
century. Deforestation has a negative impact on
rainfall and, even more important, fosters erosion and
the buildup of sediment in the lakes, which creates
problems for navigation. Frequent dredging is expensive
and introduces delays that detract from the canal's
competitiveness with other forms of transoceanic
shipment.
It is like the maintenance issue, Senator. You can get very
different opinions from different people from the shipping
industry, from the canal commission itself, from the Panamanian
Government, from the United States Army Corps of Engineers. You
can get different estimates about how well the canal has been
maintained since 1978. None of them are completely and robustly
positive, but some are modestly positive, some are not.
We really ought to ask the experts to come in and tell us
more.
Senator Dodd. Well, I appreciate you making that last
point, too, because in fact I have been down a couple of times
and been impressed by the professionalism of the commission and
the people around it, many of whom of course have worked for
years with the United States when we were operating the canal.
So they did not come de novo to this process.
It is just a factor of years. There is a deterioration that
occurs, obviously, and that will happen. But I think, in
fairness to the Panamanians, I think there is a degree of
professionalism. They obviously appreciate what value this has
to them economically. In the absence of this, it is a major
disruption. So any intentional disruption of the use of the
canal, while it obviously poses problems for us and others that
are of major concern, for them it is catastrophic in
proportions if it does not work. So that motivational factor I
think ought not to be disregarded in talking about what
Panamanian interests are going to be here as they look to the
maintenance and operation of this facility and obviously the
importance of preserving it from potential disruption by
outside interests that may have other strategic goals in mind.
That ought to be, I think, kept clearly in the forefront of our
minds as we discuss this.
I would be remiss if I did not also suggest here in the
hearing how fortunate we have been to have Bill Hughes as our
Ambassador in Panama, who has done a wonderful job in my view
down there raising these issues and highlighting some of the
very specific concerns that we should have.
I do not disagree with you, Bob. I think your point, and I
know you make it with an obvious degree of some reluctance, and
that is that we have not, and in my view as well, paid the kind
of attention--too often this happens. It is not unique to
Panama. We get involved in an issue here and we focus on it,
Mr. Chairman, and it becomes the hot issue of the day and once
it is ``resolved'' one way or the other, we sort of move on,
and we wait for the next crisis to emerge before we respond to
it here.
Certainly in Panama we have responded during the Noriega
years, but then have sort of backed away again from the kind of
sustained interest in seeing to it that these treaties would
not just work in terms of a treaty working, but also that the
canal would be working as well as it could be.
So I take your concerns that you have raised here to heart,
and I am sure those who are listening to your comments will as
well. And with 18 months to go, there is time here to take some
positive steps that could certainly correct or at least
moderate some of the problems that have emerged over the past
20 years.
So Mr. Chairman, I again thank you immensely for the
hearing here this morning and appreciate immensely the
testimony of our witnesses as well.
The Chairman. We will not keep you for but just a little
bit longer.
Admiral Moorer referred, and I saw the media show some
interest and start scribbling on it. He said, additionally the
bid process for port control in the Canal Zone has been flawed,
and then he said:
That is a nice way to put it. Bechtel, for instance,
reportedly won the bid on four occasions, but the bids
were set aside, and we know now why. Bechtel bid $2
million yearly, Hutchison-Whampoa bid $22 million
annually, beating out Bechtel on the last bid process
by a whopping $20 million yearly.
Now, it is your understanding, and from what little we have
been able to find out--and we have got some direct formal
inquiries in process now--Hutchison-Whampoa is the concern that
has ties to Communist China, is that right? Is that what you
are saying?
Admiral Moorer. Yes, sir.
The Chairman. Why do you not extrapolate a little bit more.
Admiral Moorer. I think that, according to this writeup
that I have, that the Panamanians in effect, lured on by the
$22 million, agreed to practically every request that the
Chinese submitted. When I read about this activity of the
Hutchison-Whampoa group, I was absolutely astounded that it was
allowed to get as far as it did.
I understand that the American ambassador was not aware of
what was going on and that also the Panama Canal Commission
told an individual he had never heard of it.
The Chairman. Well, they were in slumberland. What does
that indicate to you, Dr. Falcoff?
Dr. Falcoff. Well, the way I read it, Senator----
The Chairman. The Admiral has got a point here and I hope
that the media will emphasize this, because whether we pretend
to care about it this morning or not, the Chinese having
control of the Panama Canal could be exceptionally dangerous
for the United States and our interests. That seems to be just
ignored like a ship passing in the night.
Now, what do you know about this?
Dr. Falcoff. Well, a couple points, Senator. A couple
points, if I may. First of all, I think that the bidding
process illustrates one of the problems that Panama will have
in administering all of the facilities being turned over to it,
namely corruption, payments under the counter, and so on. This
is not new to Panamanian politics.
The difference is that if you take a lot of bribes in the
selling of public facilities, those facilities probably cannot
be run efficiently, and that is going to be a big problem for
Panama.
The Chairman. And for the United States.
Dr. Falcoff. Yes, but less so, sir, for the United States
than for Panama, because in fact there are new shipping
technologies, such as the double-stacking of CONEX containers
on rail cars and air shipment, which are making some kinds of
transportation competitive with the canal. If the canal is
delayed or shut down, of course there will be serious problems
from a naval point of view and serious problems from the point
of view of some products. But of course, under the best of
circumstances supertankers cannot even go through the canal.
Neither can aircraft carriers. Some items of high value, low
volume, can be shipped by air very profitably.
It is a problem for us, but it is much more a problem for
Panama in my view.
Now, as to the strategic aspect of it, I have to say that I
am not a specialist on China. I did consult with some people
who were, whose opinion I trust, and they were not as
concerned, if I may say so, about the strategic aspect as
Admiral Moorer and some other people are. That is the best
answer I can give you to that question.
Dr. Pastor. I think it is useful to distinguish the
economic and the strategic element. From a strategic
standpoint, the Panama Canal Treaties give us adequate
authority to defend our interests, to keep that canal open. I
have no question that we will continue to use that if they are
threatened in any way. So we have all the rights that we need
to defend the canal.
From an economic standpoint, the real question is what does
this investment imply? I mean, it is not a surprise that the
Panamanians would want a bid ten times higher than another bid.
I have not looked into this particular company very closely,
but it is a very large shipping and construction company. They
now have a stake in making sure that the canal works well in
order for them to recoup their own investment, and Panama does
as well.
Panama, as Mark has pointed out, is in a competition. This
is not the only transportation link between the oceans. There
is a land bridge. There are a lot of other alternatives.
So I think they understand how vital is this resource and
the need to remain competitive. And that will impose on them a
degree of austerity or rules that will ensure that if they do
not do it right they are going to be the ones that will pay the
biggest price.
The Chairman. I want you to comment on that, Admiral. But
to the extent that it is the dangerous thing for the United
States potentially, it is a bargain for China and a bargain for
Hutchison-Whampoa and everybody involved in that transaction. I
think that is what you are saying, is that correct?
Admiral Moorer. That is right. Also, Mr. Chairman, if I
may, I would like to point out that there is far more going on
here than meets the eye. A company called Panama Ports Company,
affiliated with Hutchison-Whampoa, Limited, through its owner
Mr. Li, who is well known as being super-rich, currently
maintains control of four of the Panama Canal's major ports.
And now Panama Ports Company is 10 percent owned by China
Resources Enterprises, the commercial arm of China's Ministry
of Trade and Economic Cooperation.
On July 16, 1997, Senator Fred Thompson was quoted by the
South China Morning Post as stating that China Resources was
``an agent of espionage, economic, military, and political
espionage, for China.'' And further, the same newspaper article
said that China Resources ``has solid relations with the Lippo
Group.''
The Chairman. We are going to continue to followup on that.
Admiral Moorer, I agree with you. I cannot see why it is
helpful to the United States at all. We sort of need some help
once in a while in foreign affairs.
Anybody got anything else to add? I say very often that the
best speeches I ever made are the ones driving home after I
have made the speech. I say: Why did I not say that? Do you
have anything to add, Dr. Pastor? And incidentally, we are glad
to have you here.
Dr. Pastor. Well, thank you very much for saying that. I
find it a special treat that, on the principal question that
you put before us on what the U.S. should do with regard to the
MCC, the counternarcotics facility, that we are in agreement,
Mr. Chairman, but not with my two panel members.
The Chairman. Dr. Falcoff?
Dr. Falcoff. No, Senator. I merely want to thank you for
this opportunity, and I hope that you will call on me again if
you need me.
The Chairman. You bet.
Admiral.
Admiral Moorer. Yes, sir. I want to point out that it is
ridiculous to compare air transport with shipping transport.
You are comparing ounces with tons. The United States really
cannot fight an effective war. There is another factor that no
one brought up, and that is that the oil from Alaska has to go
through the canal because most of the refineries are in the
Gulf. And there are several other things that make it vital
that we have access to the canal and have the canal running.
I think that, as I said a while ago, that if we were in an
emergency of the level of World War I or II and did not have
that canal, we would have to take it.
The Chairman. On that note, we will bid adieu. Seriously,
thank you, gentlemen, for coming this morning. We may ask you
to come again after the full committee considers the testimony
that the full committee and the majority missed. There being no
further business to come before the committee, we stand in
recess.
[Whereupon, at 11:59 a.m., the committee was adjourned.]
A P P E N D I X
----------
Replies of Admiral Thomas H. Moorer, (U.S.N. Ret.) to the Comments of
Hon. William Hughes, Ambassador to Panama, Upon Adm. Moorer's Testimony
Before the Foreign Relations Committee of the United States Senate
[Ambassador Hughes submitted written comments for the consideration of
the Committee, which are included in the record by the Chairman.]
Date of Original Testimony: June 16, 1998
Date of Replies: August 20, 1998
(Also included: Comments of William Bright Marine, a Panamanian-
American dual citizen and businessman, and a candidate for the
presidency of Panama)
Opening Comment of Ambassador Hughes:
The Chinese and the Ports: A Threat to the Canal?
In his June 16, testimony before the Senate Foreign Relations
Committee, Admiral (ret.) Thomas Moorer asserted that the contract
between Panama Ports Company (PPC--a subsidiary of Hong Kong-based
Hutchison Whampoa) and the GOP [Government Of Panama] grants PPC rights
which could affect the security and operation of the Canal, in conflict
with the Panama Canal Treaties. The contract was given legal effect as
Panama's Law #5 of January 1997. In assessing the Admiral's concerns,
it is useful to note that the Canal and the ports at either end of it
are separate and distinct entities, and ships transiting the canal are
not required to go through PPC ports. Ships entering PPC ports,
however, do transit the Canal channel. Port tugs operate within the
ports, in turning basins adjacent to the Canal, but do not disrupt the
normal transit of ships through the Canal channel. Many of Admiral
Moorer's comments focus on possibilities that could arise in managing
the traffic.
Admiral Moorer Replies:
Any one who has been involved in logistic planning where the time
of transit from sources of supply to the deployed forces is so
critical, knows the danger faced when choke points are controlled by
unfriendly forces. In the case of the Panama Canal any entity that
controls the anchorages has the capacity to control and disrupt the
flow of shipping. Panama's recent Law #5 does just that. It gives the
PPC, closely allied with the commercial arms of the Chinese military,
(As has been recognized in the maritime press and by Senator Thompson's
committee, among others) control of the anchorages and anchorage area.
Thus the distinction made by Ambassador Hughes between the ports and
the canal proper is evasive and irrelevant. The capability to interfere
with U.S. National Security that was so carefully guarded against by
the terms our Senate put into the treaty with Panama is the problem
here. It is Law #5 which creates that capability of interference with
that security and which, therefore, violates the treaty. In the event
of a military confrontation in the Pacific, (e.g. Taiwan Straits or
Korea) the large number of logistic ships required to support our
deployed forces in the western Pacific must have available to them
unfettered transit of the canal from a matter of hours to a maximum of
ten days to sustain combat effectiveness. The forward deployed forces
in the Eastern Mediterranean (NATO) or the Persian Gulf require the
same assurances for logistic resupply from the Pacific to the Atlantic
through the Canal. Control by a hostile power of the approaches to the
Canal and the anchorages that would interdict the timely transit of
those ships could require taking the facilities by force at a high cost
in American lives. It is not ``managing traffic'' under normal
circumstances with which I am concerned, it is the ability of a
potential enemy to disrupt traffic so as to block military supply,
which in times of conflict is 80 to 90 percent dependent upon sea lift
capability for there to be any sustained forward effort.
Mr. Marine Comments:
Law #5 is not only for the ports, but includes other areas as well.
The anchorages are located at each end of the Canal and on the Atlantic
side ships using the Canal must go through the breakwater and anchorage
area. Hutchison Whampoa (PPC) controls the anchorage areas. Law #5
allows PPC to cite interference in the areas that they control and take
action to block that interference. The Panama Canal Commission proper
(PCC as opposed to PPC) does not take control of a ship until it enters
Canal waters. Thus ships that are barred from entering the anchorages
are effectively blocked from use of the Canal.
Ambassador Hughes:
Institutional Framework:
It is also important to understand the subordinate relationship of
Law #5 to the Panama Canal treaties, the Panamanian Constitution, and
the Panama Canal Authority (PCA) Organic Law (Law 19 of June 1997).
Under Panamanian Law, treaties and international agreements have
precedence over Panamanian domestic laws, including Law #5. Article V
of the agreement in Implementation of Article III of the Panama Canal
Treaty specifies that any changes made in the ports requires PCC review
and approval. Furthermore, any conflict between Panama's Constitution
and Panamanian law is resolved in favor of the Constitution. Article
310 of the Constitution states that ``Any plans for construction, the
use of waters, and the utilization, expansion, and development of the
ports, or any other work of construction along the banks of the Panama
Canal shall require the prior approval of the Panama Canal Authority.''
Admiral Moorer Replies:
This is hardly reassuring when one considers that Law #5 itself,
giving effective control of much of the Canal to a Chinese Communist
business front, is itself a violation of the Panamanian Constitution,
which requires a plebiscite to enact such a provision affecting the
Canal. It is misleading to speak of institutional structures in this
regard as well. The only ``institutions'' that could enforce such a
purported violation of the Panamanian Constitution, short of effective
enforcement by the U.S. Government for violating the Canal Treaty in
the first instance, would be courts. No one would be likely to have
standing to enforce such a Panamanian constitutional violation in a
U.S. court and there is not a shred of evidence that such a law could
be enforced in Panamanian courts, (if that could be done at all given
the forcing out of honest judges in recent years in Panama,) within a
time frame that would protect our national security. The idea of having
to go to court in any country to support our forces world wide (Army,
Navy, Air Force and Marines) in the event of a major contingency or
attack under our forward deployed strategy is sufficiently unworkable
as to only have to be stated to expose its lack of practicality in the
world of realpolitik or military conflict.
Mr. Marine Comments:
Panama's Constitution has not proven to be a deterrent to anything
and has been violated often with impunity. A perfect example of this is
that Panama's Constitution was violated by giving China Law #5. Under
Article 319 of the Panamanian Constitution: ``Any treaty or
international agreement celebrated between the Executive Branch
regarding the Canal, its adjacent areas and the protection of such
Canal, also the construction of a sea level canal or the third set of
locks, must be approved by the Executive Branch and then must be
approved via plebiscite no sooner than 3 months after the Legislative
Branch approves such agreement. No agreement having to do with a treaty
or international agreement will be valid unless the above article is
implemented. This article must also be applied to any contract that the
Executive Branch enters into with a public or private company or those
that have to do with other nation or nations, regarding the
construction of a sea-level Canal or the third set of locks.''
Obviously this provision was no bar to either Law #5 or the contracts
with PPC and the Constitution is paid about as much attention to as the
advice in a Chinese fortune cookie.
It is true that Law #19 requires that any major change in the Canal
ports be reviewed by the Panama Canal Commission, which is still at
present, according to the Canal Treaty, a creature of U.S. law. But
despite the presence still of U.S. law, it is not being enforced. The
environmental impact statements, for instance, required by U.S. law,
are nowhere to be seen in the massive work already done by Hutchison
Whampoa companies in building extensive new piers in the ports and
creating very large landfills. The reason for the landfills clearly
affects U.S. national security. The largest one was allowed when
Hutchison, in cooperation with four Panamanian entities, was thwarted
by Panamanian popular opinion and outcry in taking over Albrook Station
military air field. The Panamanian public rebelled at the idea of a
Chinese Communist related company being given a substantial ownership
of a huge military airfield when it was supposed to be in the port
business. But then, in its place, Hutchison is being allowed to build a
huge landfill at the port, a project initiated with no forethought and
one which appears to have no relationship to ocean shipping and to be
an environmental nightmare. For ``giving up'' its Albrook participation
Hutchison Whampoa got something else in exchange as well, in the form
of a 60 million dollar discount on its promised annual payment to the
Government of Panama from its concessions, thus causing the Government
of Panama to bargain with itself and give up a very large portion of
what it supposedly gained in the very large bid it got from the
Hutchison Whampoa interests for giving up all of these concessions.
This is just one of many steps where the Communist Chinese government
appears to be shaving back its overwhelmingly larger monetary bid with
which it bought Law #5 and it illustrates how the institutional
structure is working against and not for both U.S. and Panamanian
national security. For there is nothing to prevent Hutchison Whampoa
from participating in owning Albrook, and possibly Howard as well
starting when the U.S. leaves in 2000, or, for that matter, from
building a military airfield on the landfill later on. The intention
has been revealed. It is just a matter of when the Hutchison and its
Panamanian allies feel they can get away with it.
Was the Panama Canal Commission (PCC) involved in the negotiations
over these matters? To my knowledge it was not. There is also extensive
work being done at Amador, a military base of enormous strategic
importance, historically and even today, which is right at the entrance
to the Canal. No environmental studies are being done as this work
forges ahead. This project is owned and is being managed by private
entities controlled by Panama Canal Commission Administrator Aleman
Zubieta and came to him after he dropped his initial opposition to
Hutchison interests being given the ports they now control and all of
the contractual and service rights which they received. The work has an
ostensible commercial purpose which appears to be simply a ``scam'',
because at bottom it makes little commercial sense as presently
conceived though it makes excellent strategic sense. The idea being
publicized is that this will be a resort development with hotels,
casinos and other attractions for cruise ships and that the development
will include a cruise ship port. This appears to be a pretense because
Amador includes a causeway three miles long that protects the Canal
entrance. On the other side of the causeway is Panama Bay, where the
water is heavily polluted by the raw waste of Panama City, which is
pumped directly into it. Though the scenery is magnificent, what kind
of resort can you build on the shores of what amounts to an unfiltered,
untreated sewage dump? Despite this the first Panamanian administrator
of the Panama Canal Commission, Alberto Aleman Zubieta, has made no
comment about this project and its commercial impracticality as
presently conceived and about its environmental dangers. Why? Surely
one of the reasons is that, since these matters began to develop, his
private company, CUSA, which he operates in addition to being head of
the PCC, has received a 24$ million contract to tear down the existing
facilities there, which are valued at several hundred million dollars,
a project that again does not make commercial sense. The Panamanian
government received a 69$ million loan for the purpose of making Amador
a tourist development So the 69$ million covers the 24$ million. In my
opinion, based on experience and history, the insiders are going to
drain off the 69$ million to themselves and their associates and the
project will founder and have to be bailed out. This will increase the
security threat not decrease it and it shows how the ``institutional
structure'' is working.
Though the Panama Canal Commission itself is still a joint U.S.-
Panamanian project, it also illustrates how the ``institutional
structure'' is operating to make matters worse not better, contrary to
the position of Ambassador Hughes, that the Panama Canal Commission
will cease to exist as the Treaty reaches its conclusion and will be
replaced by the Panama Canal Authority (PCA). Who is the President of
the PCA? Jorge Ritter. He is the chief Panamanian negotiator who has
purposely torpedoed base talks in Panama, even though 80% of
Panamanians want the U.S. to stay. He has been tied by the Panamanian
press and the outside press to the highest levels of the drug cartels,
and he served as Panama's ambassador to Colombia during the time that
the dictator Noriega was doing business with the drug cartels in
Colombia. He was more than an ambassador, he was Noriega's point man in
Colombia. Another incident involving Jorge Ritter was reported in the
Miami Herald about six months ago: Ritter provided Gaucha (Capo of one
of the drug cartels) with a Mercedes. It was also reported that when
the drug capo Jorge Escobar was killed in Colombia, they found a
Panamanian Cedula (ID card) on him. It had been procured for him by
Ritter. Escobar was the most violent capo and the enforcer for the drug
cartels. It was he who had even blown civilian airliners out of the sky
in Colombia. So this is the institutional structure that is in charge,
a threat to the security of both Panama and the U.S.
Ambassador Hughes:
When Law 5 was being debated by the Panamanian Legislative
Assembly, PCC officials arranged, with the complete knowledge of Panama
Ports Company, for an override provision ensuring PCA [Panama Canal
Authority] authority. Article 2 of Law 5 states: ``Pursuant to the
provisions of Article 310 of the Constitution, whereby the Panama Canal
Authority is established and granted attributes and responsibilities,
and also by virtue of the close ties that exist between the activities
of the Authority and the operation of the ports adjacent to the Panama
Canal, the contract contained in this law is approved under the
condition that none of its clauses may be interpreted in a manner that
is contrary to the attributes, rights, and responsibilities that are
conferred upon the Canal Authority in the referenced constitutional
provisions or in the law whereby the Authority is organized, especially
in relation to the use of areas and installations, marine traffic
control and pilotage of vessels transiting the Canal and its adjacent
ports, including its anchorages and moorings. In any case, when a
conflict exists between the stipulations of this contract and the law
whereby the Canal authority is organized or with the regulations that
develop such law, the latter shall prevail over the former.''
Admiral Moorer Replies:
Again, there is no practical way to enforce this provision if a
military confrontation necessitating transit of the canal to support
our forward deployed forces should occur. I cannot emphasize too
strongly that the national security requirements imposed by the Treaty
speak to the allowance by Panama of the existence of the threat in the
first place. It is mere capacity that threatens national security and
that is barred by the provisions which this body added to the Treaty.
Once the threat is in place those provisions of the Treaty are already
breached. The violation that is thus created cannot then be cured by
some abstract legal right that, as a practical matter, is unenforceable
for lack of a timely remedy. Resort to litigation in some judicial or
arbitration forum cannot be timely from a military perspective and,
from such a perspective, is not sufficiently reliable for military
planning. The impingement upon and interference with the operation of
the Canal as threat exists by virtue of Law #5. In time of conflict
there would be no practical enforcement of this supposed right short of
armed seizure at the loss of American lives. I note that in this
comment Ambassador Hughes is dropping his opening pretext that the
ports and the canal are separate. His argument now shifts to admitting
that they are not but that there is a legal right that would suffice
for our national security. This shift is misleading.
Mr. Marine Comments:
When Law #5 was pushed through, the Administrator of the Panama
Canal Alberto Aleman Zubieta freely stated that Law #5 that the
agreement in the law should be canceled because it included violations
of the Panamanian Constitution and the Panama Canal Treaty. He was
quoted as saying this in an article reporting on his opinion about Law
#5 in the Panama America (dated 4/15/97) by former Vice President
(Christian Democratic Party) Ricardo Arias Calderon. I myself had
learned this in a phone conversation with a partner of Aleman Zubieta
prior to the publication of that article, i.e., that he was opposed to
Law #5. It should be noted also that under the agreement of Law #5,
even if the U.S. were to prevail upon Panama to override Law #5
provisions as violating the Panama Canal Treaty, that is a violation of
the language of Law #5 which requires Panama must pay the Communist
Chinese affiliated PPC and indemnify it for all losses incurred. So
that here again the institutional structure behind Law #5 operates
against and not for U.S. national security interests. Because this
language would force the U.S. to financially damage Panama if it
chooses to enforce the treaty over Law #5, in order to enforce the
Canal Treaty by protecting its national security interests. Thus, in
enforcing its national security interests the U.S., by the language of
Law #5, would trigger the requirement that the Panamanian Government
pay the front for the Communist Chinese military, engendering ill-will
and providing fodder for the Panamanian extreme left. This extremely
vocal minority of Panamanians loves to whip up an anti-gringo fever
anyway in order to provide cover for its efforts to undermine the
sovereignty of Panama in the name of its diehard attachment to its
failed ideal of communism. The Panamanian hard left is very pro-
communist Chinese despite the current widespread resentment in Panama
of the Chinese communist infringement upon Panama's national security.
Ambassador Hughes:
This article is specific as to anchorages, traffic control, and
pilots, and is also quite sweeping [in] its overall scope. PCC
officials are confident that these legal safeguards are adequate to
protect future Canal operations. In the event of a conflict or a
challenge by PPC, Clause 3.4 of Law 5 provides for arbitration
``according to the Rules of Conciliation and Arbitration of the
International Chamber of Commerce.'' Furthermore, ``the seat of the
Arbitrating Tribunal will be the City of New York, and the arbitration
proceedings shall be in English.''
Admiral Moorer Replies:
I am unable to understand how an American ambassador can assure the
United States Senate that concerns of national security are alleviated
by the fact that officials of an organization that has become
increasingly responsive to the wishes of a commercial entity closely
allied to, and virtually part of, the enormous business operations of
the Communist Chinese military ``are confident that . . . legal
safeguards'' which they have negotiated without any participation by
the United States. or without even keeping the United States informed,
for that matter, ``are adequate to protect future Canal operations.''
It is not the question of specificity of reference ``to anchorages,
traffic control, and pilots'' that is significant, it is that the
specific references do not change the simple fact that a major
strategic opponent is being given the capability to interfere with our
unimpeded ability to use the Canal where the national security
interests of the United States are concerned. And who gave Panama the
authority under the Canal Treaty to agree to have matters arbitrated
under the rules of the International Chamber of Commerce? Not only are
such arrangements inconsistent with our nation's security, they are
inimical to it. The International Chamber of Commerce has historically
been disinclined to rule fairly in favor of U.S. interests and for that
reason is often avoided by American business in its international
dealings. This hardly augers well for our security interests as a
nation.
Ambassador Hughes:
Pilotage
Following is a point-by-point commentary on the issues raised by
Admiral Moorer. His first point was that the contract gives the company
responsibility for hiring new Canal pilots.
Comment: Article 57 of the PCA Organic law, however, states that
the PCA ``shall regulate . . . navigation in the Canal, vessel transit,
inspection, and control, and all other activities related to navigation
in the Canal and adjacent ports, including maritime safety, pilotage,
and the issuance of special licenses to pilots, mates, and operators of
vessels and other floating equipment to work in the Canal.''
Implementing regulations, currently in draft, will establish PCA
practice with regard to employment of pilots. However the law is
implemented, PCA will have the final say.
Since the movement of ships to, within and from a port is critical
for any port operator, it was logical for Panama Ports Company under
Law 5 to seek to assure access to pilotage services whether from PCC/
PCA of from its own pilots. It also sought guarantees of coordination
with the PCC/PCA to assure ``efficient'' operation. Under current
practice, pilots, who are employees of the PCC, board ships at Canal
entrances and pilot them either in transit to the other end, or to
dockside in the ports. Pilots in the ports, also employees of the PCC,
move ships for activities like loading and unloading.
Law 5 establishes PPC's right (Clause 2.10c) ``to have and operate,
under a separate concession from the National Port Authority . . .
pilotage services. It also (Clause 2.12i) obliges the GOP to
``guarantee, at the election of the customers of the Company and on a
non-discriminatory basis, the services of the pilots appointed by the
PCC or its successor [the PCA, headed by Jorge Ritter, Noriega's drug
ambassador to Columbia], and to provide such pilotage services in
accordance with established standards.'' But ``If service levels are
not obtained by the customers of the company, then they will have the
right to directly hire the pilots they deem necessary for performance
of such services.'' Since coordination with the PCC/PCA is critical,
Panama Ports Company also sought (Clause 23.12j) to oblige the State to
coordinate with the PCA/PCC pilotage services in port. Again, if
service levels were not obtained, the ``the Company may ask the State,
and the State must provide to the Canal Commission or its successor
agency sufficient additional pilotage resources to allow it to provide
efficient service at a reasonable cost.'' Such services would be
provided in accordance with applicable Canal regulations and
procedures.
Admiral Moorer Replies:
It takes a long time to train a pilot for any particular waterway.
Piloting skills are irreplaceable in a short span. This is even more
critical for a ``lock'' canal where pilots are normally granted
complete control during a ship's passage. The mere power to train its
own pilots in an operation so closely tied to the PLA as the PPC is,
will be a threat to our national security. But now we learn from
William Bright Marine that Panama has agreed in Law #5 to allow
Communist Chinese affiliated Hutchison to retain and use its own
pilots, thus giving it the right to train pilots. All Hutchison has to
do is to state that its (Hutchison's) customers are not satisfied with
the performance of pilots provided by the Panama Canal Commission
(which will become the Panama Canal Authority once the U.S. leaves.)
Hutchison's customers include COSCO and many other arms of the People's
Liberation Army, as well as those entities so anxious to do business
with Communist China that they are willing to compromise the security
of nations to please the Chinese Communists. In the meantime the
training of pilots by the PCC is declining as the U.S. departure nears.
It is easy to see where this is headed--toward de facto control of
pilotage by Hutchison, which is subservient to the interests of the
Chinese Communist military and its strategic goals. In the Vietnam
conflict the President authorized the mining of Haiphong Harbor with a
proviso that mine activation be delayed to allow sufficient time for
neutral merchant ships to leave port. The Vietnamese, not wishing to
lose the material in the unloaded ships, precluded their timely
departure by the simple expedient of moving the qualified pilots up
river out of the reach of those ships. The pilot issue is one that
should not be avoided or evaded by an American Ambassador. To do so is
to place us in a position where hostile action by Communist China,
e.g., against Taiwan, could only be dealt with by the use of massive
military force under extremely adverse conditions to retake the Canal
with a large cost in American lives and extensive collateral damage to
non-combatants--to Panamanians, to Americans, to other allies and to
ships of other countries.
Mr. Marine Comments:
It takes six (6) years to train a Canal Pilot. The effect is to
grant control of pilotage, along with other crucial services, to the
PLA affiliated Hutchison Whampoa operations within the near future.
This combines with control of facilities and land which would render
U.S. forces incapable of forcing the passage of the Canal and
landlocked, so that Panama's national security would be endangered by
the high cost the American military would have to pay to open the
canal, including having to bring pilots out of retirement or otherwise
secure pilot services at a corresponding cost in efficiency of
operation. The danger for Panama is that the cost to America to protect
the Canal would be raised so high that America might acquiesce in
actions which would lead to effective, non-American foreign control of
Panama.
It should be noted that in Law #5 paragraphs in 2.12 I and J are
identical but for one important omission. Under J the language states
``port pilots'', under lit just states ``pilots.'' Both sections state,
it is true, that the rules must be enforced that the Panama Canal has
in place. This was a concern to the U.S. embassy, I grant, and the
embassy's copy of Law #5, when it finally got it, shows underlining
under these provisions. At present under these regulations, when a ship
comes into a port, a Panama Canal Commission brings it in. When the
ship then leaves a port to transit the Canal, a Panama Canal Commission
also takes it To reach the ports on the other side the ship must travel
through Canal waters. But, under this article all the Hutchison company
has to do is declare that its clients are unhappy with the existing
services and it can name its own pilots. Hence the contracting of the
training for the pilots to Hutchison Whampoa. We see in the figures
given by Ambassador Hughes that a very large number of communist
Chinese ships transit the Canal each year and, of course, these ships
are ships of COSCO, another branch of PLA, Inc. So if the ships run by
the Communist Chinese military declare that they are unhappy with the
pilots from PCC/PCA, under Law #5 the communists can simply train their
own. Remember these are the folks that, under a similar system, crashed
one of their ships into the shopping center on the New Orleans levee.
The PPC pilots could do the same and put the Canal out of commission.
Under the guise of privatization, Hugo Torrijos and President
Balladares placed in Law #5 this provision to allow themselves and
their partners in the Communist Chinese affiliated Hutchison interests
the contract for pilotage in the Canal. PCC is presently negotiating a
contract with the pilots and has already proposed allowing the ship
captains to pilot the boats through the Canal, and privatization of
pilot services.
Ambassador Hughes:
Anchorages
Admiral Moorer maintains that the contract grants the company
control over critical Atlantic/Pacific anchorages, including a monopoly
on the Pacific side when Rodman Naval Base reverts.
Comment: Since Law 5 is a concession to manage ports, it does give
PPC control over areas and facilities needed to that end. However,
Article 58 of the PCA Organic Law provides that ``all vessels or craft
transiting or moving in Canal waters, anchorages, mooring stations, and
the ports adjacent to the Canal shall be subject to the orders and
supervision of the Traffic Control of the Authority, in accordance with
the Regulations.'' Thus the PCA retains control over anchorages.''
Regarding Rodman, Clause 2.1 of Law 5 states: ``It is agreed that
during a period of three years form the effective date of this
contract, the State shall not grant the right to operate quay-side
cargo handling businesses (including general cargo, container,
passenger, bulk and roll-on/roll-off, but excluding fuel warehousing
and supply activities) in the area of Rodman Naval Station to any
individual, corporation, or incidental party without first giving the
Company the right of first refusal to operate this business in the
Rodman Naval Station, on the same terms and conditions no less
favorable than those offered by the third party or parties, as the case
may be.''
This provision clearly represents an effort by Hutchison to deter
competition on the Pacific side, and was controversial because it was
not included in the original bidding terms. At the time Law 5 was
negotiated, Manzanillo International Terminals (MIT) was negotiating
for the right to develop a competitive container port in an area just
north of Rodman. However, in a preliminary assessment of MIT's
proposal, the PCC noted that MIT might have to dredge a new turning
basin at a location acceptable to PCC to avoid interfering with Canal
operations. It further noted that the proposed third set of Canal
locks, if constructed, would pass through the Rodman area. MIT
concluded that its proposal was unfeasible. Subsequent to passage of
Law 5, the GOP granted a concession at Rodman to Alireza Mobil
Terminals (Operator of Arraijan Tank Farm), which is already using two
piers to provide bunkering (fuel) services, and has additional plans to
develop the waterfront area, but presumably not in a manner that would
trigger Panama Ports Company's right of first refusal.
A study performed by the Japanese International Development Agency
found that Farfan, beyond the Bridge of the Americas, on the Pacific
side, is the logical area for long-term port expansion, though such
development would require considerable investment. Farfan is nowhere
mentioned in Law 5, and PPC has no rights vis-a-vis Farfan. Thus, a
long-term PPC monopoly on the Pacific side is by no means ensured. The
bottom line is that competitors would have to invest considerable sums
to compete with PPC's Balboa operations.
With regard to competition at the northern terminus of the canal,
Taiwan-owned Evergreen and U.S.-owned Manzanilla International
Terminals already compete with Panama Ports Company.
Admiral Moorer Replies:
I speak of our national security and the Ambassador answers by
speaking of the lack of commercial competition and the possibilities
for capital-intensive expansion of port capacity. This does not answer
what I have said, it evades it. Granting the right to take over Rodman
is a threat to our security because of its location and the facility
that it is. If the PLA wants Rodman for strategic reasons, it can have
Hutchison Whampoa take it and use it for its strategic purposes, that
is the bottom line.
Mr. Marine Comments:
As a practical matter, and under Law #5, Hutchison Whampoa's
company can interfere with ships coming into the anchorages by simply
claiming interference. Thus the Panama Canal Commission has lost
effective control, regardless of how responsive it might wish to be to
U.S. national security interests, if that can be safely presumed.
The effect of the first right of refusal as granted to Hutchison
Whampoa's company is to give this affiliate of the PLA control without
having to put up any investment. The pattern that is shaping up is
that, much in the manner of the shrewd traders of the Soviet Empire in
its heyday, Hutchison Whampoa will control the situation, shave back
what it is obliged to pay and generate income from controlled
Panamanian assets to finance the exercise of options and other avenues
of expansion. The degree of PLA control, and the overall giving in to
its strategic purposes is revealed by the fact that Rodman was not put
on the table for bargaining in the attempts to bargain with other
possible licensees of the ports in their negotiations with Panama, but
it was not only put on the table, it was negotiated to Hutchison
Whampoa.
A Senate report tells how MIT was coerced out of the Law #5 bid by
Gabriel Castro, National Security Advisor to President Balladares. It
seems that Sr. Castro is not interested in the national security of
either Panama or the U.S. but rather the strategic goals of Communist
China. Communist Chinese Ambassador Ju stated in an interview in La
Prensa that Gabriel Castro was the best friend that the PRC had in
Panama. There was protest which resulted in Rodman being offered to
MIT, but when the Chinese Communist affiliates learned of this, they
threatened to pull out with their payments above and under the table.
So the Communist Chinese allied Hutchison Whampoa controls Rodman until
after the U.S. leaves, at which point they will use further bribery to
keep it under their control. So far the arm of the Communist Chinese
has gotten whatever it wanted in implementing the Law #5 agreement. To
assist the Chinese Communists, the Balladares gang has thrown other
companies out of the ports, raised rents on still others and has
allowed the Chinese Communist affiliate to exercise its option on
Telfers Island. The Communist Chinese have been allowed to order the
Panama Canal Commission out of their ports, thus creating large zones
into which anything, including armaments, could be shipped into the
sealed port zones in sealed containers and remain there indefinitely
without monitoring or examination.
Admiral Moorer Inserts Parenthetically:
Such sealed containers could contain missiles with nuclear warheads
that could be easily launched to reach targets within the continental
United States. This is another reason for a continued U.S. presence to
prohibit the ability of the Chinese to take control in a military way.
Otherwise the Communist Chinese would be on the spot while we would be
faced with the need to remove them by moving troops from a distance
with attendant loss of life to American soldiers, sailors, marines and
airmen.
Mr. Marine's Comments Continue:
Ambassador Hughes is correct about the expense of developing
Farfan, but this illustrates that it is an illusion to maintain that
there is much of an opening for competition. The overall effect is
clearly to give Hutchison Whampoa interests control of all important
strategic areas. We also note that the Communist Chinese affiliated
Hutchison Whampoa interests are introducing Communist Chinese labor
practices, to further gain a competitive edge to their commercial
practices that results in a strategic advantage. Both MIT and Evergreen
have created numerous jobs, and, by comparison to Hutchison Whampoa,
have made heavy investments. By contrast Hutchison Whampoa's PPC fired
1,500 workers and then hired back only 400 at less than half of their
prior wage. This has silenced the employees and effectively made sure
that they will not report on any practices engaged in by the communist
affiliated Hutchison Whampoa company which might be a threat to U.S. or
Panamanian security and would be recognizable as such.
Ambassador Hughes:
Order of Ships; Denial of Access
Admiral Moorer stated that the contract gives the company authority
to control the order of ships utilizing the entrance to the Canal on
the Pacific Side, and the right to deny ships access to the Canal which
are deemed to be interfering with Hutchison's business in violation of
the 1977 Panama Canal Treaty, which guarantees expeditious passage for
the United States Navy.
Comment: There is no provision in Law 5 on the order of ships
entering the Canal on the Pacific Side. The only reference to ship
priority is found in Clause 2.10G, granting the company the right ``to
continue the current practice that any vessel in the Port of Cristobal
maintains its pre-booked transit slot in the transit schedule of the
Panama Canal.'' Cristobal, of course, is on the Atlantic side. There is
no such provision for vessels at Balboa.
Admiral Moorer Replies:
Precisely, the Ambassador confirms my fears and his conclusion is
not justified by what he himself admits. He acknowledges the peril and
then denies that it exists. By giving a company that is hand-in-glove
with the Communist Chinese military the ``right'' to do what is now
done by the Panama Canal Commission, the scheduling power is taken from
the Canal authorities and given to a company which is virtually an arm
of Communist Chinese military strategy, along with the ports of Diablo,
Balboa, the rights to have and operate the piloting and switching tugs,
the work boats, the vessel repair services and, most importantly, the
pilot services. It was this control of pilot services that was used
effectively against us by the North Vietnamese Communist military in
Haiphong Harbor. These ``rights'' granted to a company strategically
allied with the Chinese Communist military, which in turn, is
subservient to the party apparatus, are thereby taken away from the
Canal Commission. The effect is to erase any distinction between
commercial and strategic considerations and place our military needs
for the effective preservation of America's national security interests
at the disposal of a country that has the potential to become a
dangerous strategic enemy.
Mr. Marine Comments:
The current practice is that the Panama Canal Commission exercises
authority to maintain transit reservations. By omitting any deference
to that existing practice, the clauses in Law #5 give the right to the
Panama Ports Company, which is Hutchison Whampoa, the Chinese Communist
military affiliated operations, the power to exercise this authority in
the place of the Canal Commission. The absolute control over the port
and anchorages on the Pacific side includes the same power. 2.10 of Law
#5 gives Hutchison Whampoa's subsidiary the right to close the roads,
Diablo, Balboa and the rights to have and operate the tugs, the work
boats, the vessel repair service and the pilot services. The combined
effect is to wrest the better part of the functions for controlling
transit from the Canal Commission and hand them to a Chinese Communist
front group. This is a great infringement of Panama's security and
sovereignty and effectively creates another Canal Zone under the
control of Communist Chinese dominated and allied interests. Given the
incompatibility between Panama's republican form of government and
Chinese Communism, which is one of world's largest employers of slave
labor, the effect is to force Panama out of its democratic leanings
modeled on its long association with the U.S. and into the orbit of
Communist China and a system of government which most Panamanians
oppose.
Ambassador Hughes:
There is also no reference in Law 5 to denial of entry of ships to
the Canal. Only the PCA [Panama Canal Authority], under Article 59 of
the Organic Law, has the right ``to deny entry to the Canal of any
vessel not abiding by the rules and regulations for navigational safety
established in their Law and Regulations.''
Admiral Moorer Replies:
As a former Commander-in-Chief of our Pacific Fleet, Supreme Allied
Commander, Atlantic and Commander-in-Chief Atlantic Fleet, Chief of
Naval Operations, and Chairman, Joint Chiefs of Staff, where an enemy's
capabilities--not an estimate of his intentions--are the basis for
strategic planning, I consider the Ambassador's answer to my testimony
in this regard most unresponsive. The point is that, regardless of what
the Canal Authority has the right to do or not do, the practical power
of controlling anchorages, scheduling, pilotage and services is placed
in the hands of a commercial affiliate of a strategic foe that is
already on the spot and functioning, one that operates under a system
that makes no difference between commercial and strategic planning,
because the bulk of its commerce is, in the last analysis, controlled
by its military and party apparatus, not by private merchants or
entrepreneurs, however wealthy they may become from the monopolies
which this apparatus bestows upon them. The Canal Treaty gives us the
right to preserve our National Security in connection with the Canal.
The operational capacity of an entity which is so closely tied to the
Chinese Communist military to impede our passage through the canal by
practical control of services and facilities essential to that passage
is by its mere existence a threat and a violation of national security,
regardless of the rights of the Canal Authority.
Mr. Marine Comments:
Once again, if the ships cannot enter the anchorage area, they
cannot transit the canal. Hutchison Whampoa controls the anchorages;
the Canal Commission does not.
Ambassador Hughes:
Regarding access to ports, Clause 2.11D of Law 5 obliges PPC
[Panama Ports Company, the Hutchison Whampoa subsidiary company] to
``permit the use of installations in the Existing Ports to US Army
vessels, as established in the Panama Canal Treaty, until the
expiration of such Treaty in the year 2000 . . . provided that such use
does not interfere with the daily operation of the Company in the
Existing Port, but the Company will have the right to charge for the
services it provides at commercial rates similar to those applied to
the customers of the Company.''
It should be stressed that Clause 2.11D refers to vessels' access
to port services in installations adjacent to the Canal, and not to
Canal use. This provision is intended as a specific limitation on the
Company's operations during the Treaty period. Thereafter, US military
vessels are free to contract on a commercial basis with PPC for access
to ports and needed port services.
Admiral Moorer Replies:
The Ambassador's statements are made as if they refuted my
testimony when in fact they make it clear that the Hutchison Whampoa
company is being given control over U.S. National Security. For
example, this supposed refutation of my concerns admits that, even in
this legalistic world of the Ambassador, all Hutchison Whampoa and its
head Li Ka Sheng, who is closely allied to the Chinese military, would
have to do after the Treaty expires, is to jack up the rates on
everyone to prohibitive levels on everyone and the U.S. military could
be included, and that's apart from Hutchison's control of the services
essential to passage through the canal. All I can say is that, when the
Nazis, in the years leading up to our entry into World War II, were
attempting to expand their influence in Latin America, President
Roosevelt made his concerns about the Canal known in no uncertain terms
in speeches that were broadcast on radio and shown in newsreels all
over the country. Any ambassador to Panama at that time who had shown
this degree of apologetic cooperation with the totalitarians would have
found himself recalled in short order and would have enjoyed a
considerable degree of opprobrium from the President and the American
public.
Mr. Marine Comments:
Just read what Law #5 actually says, as the Ambassador urges: all
that matters is that the use by the U.S. military does not interfere
with the daily operation of the company in the Existing Ports. Then
read what Law #5 includes, by options and extensions, in the Existing
Ports, virtually everything. It includes, for example, Telfers Island,
which is strategically placed right in the middle of Canal waters. Once
the U.S. gives up Rodman, the U.S. forces will be landlocked and
virtually neutralized. Neither Panama nor the U.S. will be secure. Even
today, before the options are exercised and the additions to Existing
Ports made, the company simply has to declare that the U.S. military is
interfering with its daily operation of its present ports.
Ambassador Hughes:
Transfer of Company's Rights
Admiral Moorer suggested that the contract gives the company the
right to unilaterally transfer its rights to a third party--any company
or nation of their choosing.
Comment: Clause 2.8 of Law 5 gives PPC [Hutchison Whampoa, the
Communist military affiliate] the right to ``assign or transfer its
rights and obligations under the present concession agreement or the
activities derived herein, as long as it is to Panamanian corporations
or to foreign corporations duly registered to conduct business in the
Republic of Panama . . . When the assignment or transfer be in favor of
a subsidiary or affiliate of the Company, it shall suffice for the
Company to communicate this fact in writing to the State. When the
assignment or transfer be in favor of third parties which are not
subsidiaries or affiliates of the Company, prior authorization will be
required in writing from the Cabinet Council, such authorization not to
be unreasonably withheld.'' Subsidiary or affiliate is defined as
including, without limitation, ``those which, although maintaining
corporate individuality, are dedicated to the same activities to which
the Company devotes itself, or to complementary activities related to
the operation of the Ports.'' Any entity to whom the company might
transfer its rights would be subject to the same conditions and
restrictions now in place, and the GoP [Government of Panama] would
retain its 10 percent equity stake.
Later in his testimony, Admiral Moorer noted that the contract
permits Panama to assign its rights under the agreement ``with no
further ado.'' Embassy is unclear about Admiral's intent in making this
statement. He may be referring to the Clause 2.8 provision explained in
the preceding paragraph.
Admiral Moorer Replies:
Well, precisely. The Hutchison Whampoa conglomeration of companies
controlled by Li Ka Sheng includes over 50 entities, in many of which
there is participation either overt or covert by the various commercial
arms of the PLA. COSCO, for example, the enormous shipping company run
by the Communists which has been aggressively attempting to use the
leverage of the Chinese Communist government to take market share from
Western private ocean carriers, could be considered an affiliate of
PPC. Any entity can either register to do business in Panama or
incorporate a subsidiary in Panama. Thus the PLA and the Communist
functionaries that control it can gain control of the Canal at any
time. It is this capability, not the formalities of the legal entities
as presently structured that must rule any consideration of what our
security means under the Treaty provisions. What the U.S. Ambassador is
putting forward here does not belie my contentions.
Mr. Marine Comments:
Panama Ports Company (PPC) as a subsidiary operation of Hutchison
Whampoa, can transfer or cede all or part of the rights and obligations
arising from the concession contract or from the activities derived
from the contract, as long as it is to a Panamanian corporation or a
foreign corporation properly registered to do business in Panama. It
costs $1,000 to incorporate or register in Panama. That's all there is
to it.
When the ceding or transfer is made in favor of a subsidiary or
affiliate of the Company, a written communication of said action from
the Company to the State will suffice. This means with a written note
Hutchison Whampoa, and behind it the PLA and the Communist Party of
China, can transfer any rights to subsidiaries or affiliates which
could include the China Overseas Shipping Corporation (COSCO), China
Resource Enterprises, the Red Army's direct commercial front, or any of
their thousands of subsidiaries and affiliates, the largest
conglomerate in communist China, larger than all of its other
enterprises combined. The United State Senate investigations have
established that Hutchison International Terminals, for example, is in
fact a 50 percent affiliate of the communist Chinese military
operations.
Ambassador Hughes:
Cutoff of Strategic Areas
Fifth, Admiral Moorer stated that under the contract, some public
roads become private, cutting off strategic areas of the Canal.
Comment: Clause 2.10e gives the company ``the right to redesignate
Diablo Road as a private service road instead of a public street, and
the right to divert that road at the expense of the Company, as well as
the right to divert Galliard Avenue (a public thoroughfare) at the
expense of the Company, if it becomes necessary for the efficient
operation of the Port of Balboa, said cost to be determined by the
Company and subject to prior approval by the State. The State shall
reimburse the Company for the referenced costs.''
Following passage of Law 5, a major land dispute developed over
areas granted to the port concessionaire but needed to operate the new
civilian airport being developed at Albrook as well as the trans-
isthmian railroad being revived by Kansas City Southern Railway, an
American company. PPC is dealing with Kansas City Southern on
implementation of their respective concessions. The PCC has approved
the port and railroad operations, and maintains overall authority
because the installations are within a Canal Operating Area. The
redesignation or rerouting of these roads does not render the Canal
inaccessible, and certainly not in a strategic context.
Admiral Moorer Replies:
It would be interesting to know what the Ambassador relies upon
when he states at the very end of this comment that ``The redesignation
or rerouting of these roads does not render the Canal inaccessible, and
certainly not in a strategic context.'' There does not appear to have
been any strategic analysis. Nor does it appear that there is any
expertise that is being drawn upon. Everything that precedes this
statement in this portion of the Ambassador's comments is about what
appears to be a concern about excessive monopolization. There is a
connection between monopolization by an entity controlled by or working
in close cooperation with the military of a strategic opponent and
national security but it does not appear that the Ambassador is giving
it any serious consideration. One only has to look at a map to see that
the power to control and reroute the roads in question would affect
military operations in the Canal area. The Ambassador does not make any
point that would alleviate these concerns.
Mr. Marine Comments:
On one side of the Diablo/Galliard Road are the ports and on the
other side is Albrook Station Air Field. When the agreement under Law
#5 was first written the Hutchison Whampoa company, as an ally of the
PLA, was given this up to date military air field and other facilities
crucial to controlling the air space above the Canal and Panama
generally. That arrangement was only abandoned in large part because of
public outcry against such a concession to an organization so close to
the Communist Chinese military. But even with that strategic withdrawal
by those attempting to assist the Communist commercial fronts the
question of the roads remains. If you close the roads down, it would
then be necessary to go all the way around this area to reach the
present, remaining U.S. military bases, seriously impeding logistics
and resupply as well as troop movement out of these bases. The effect
would be to cut off from easy access by U.S. forces critical areas in
the port of Balboa which is presently 100% under the control of
Hutchison Whampoa. From this choke point in the port of Balboa shipping
could easily be controlled with only light artillery, or for that
matter missiles. Both of these armaments could easily be present in the
port of Balboa today and neither the U.S. or the Panamanians would have
any way of knowing it. The sealed container operations of Li Ka Sheng
into the sealed port under Hutchison Whampoa control gives that
capability to the PLA, which I take it, is the Admiral's point
Ambassador Hughes:
Inclusion of ``Strategic'' Facilities in Concession
Admiral Moorer noted that the contract includes U.S. Naval Station
Rodman; a portion of U.S. Air Force Station Albrook, Diablo, Balboa, a
Pacific U.S.built port; Cristobal, a U.S.-built Atlantic port; the
island of Telfers, which is strategically located adjacent to Galeta
Island, a critical communications center. Admiral Moorer has been told
that Telfers Island is the home of the Chinese-planned export Zone
called the Great Wall of China Project.
Comment: The PPC concession does include the ports of Balboa and
Cristobal, with a 15-year option on Diablo and Telfers. The company may
exercise its option on these latter two areas by providing written
notice to the State. As noted above, Albrook, which reverted to Panama
in September 1997, has been the subject of a dispute between PPC,
Kansas City Southern, and civil aviation authorities. The company has
right of first refusal over cargo and container port development for a
portion of Rodman for three years, as previously noted, but port
development at Rodman is considered unfeasible. Telfers Island is four
miles from Galeta Island at the closest point, and is another area
where the port, if developed, would have to coexist with the railroad.
There is a proposed project called ``Gran Muralla'' (Great Wall) to
develop an export processing zone on two sites on Telfers, which the
PCC is studying to determine whether it is compatible with Canal
operations. Again, the PCC/PCA will have the final word over activities
at Telfers because it is in a Canal Operating Area. From a strategic
perspective, it is not clear that this arrangement is potentially any
more dangerous than the daily passage of Chinese flag vessels, which
has been going on for years. There were 237 PRC ship transits in FY 96,
and 215 in FY 97.
Admiral Moorer Replies:
Any one who cannot see where a sealed off port into which any
armament can be delivered undetected in sealed containers (in the same
manner that automatic weapons were shipped into this country by PLA
affiliates) is different from the passage of flagged vessels cannot
seriously have analyzed the strategic considerations involved. By the
same token any one who thinks four miles is a deterrent distance
strategically is clearly not aware of realistic strategic
considerations. There the ambassador goes again, admitting the
strategic vulnerability and then making irrelevant statements such as
that ``development at Rodman is considered unfeasible.'' The question
is not one of commercial feasibility, but one of strategic
vulnerability, to which the Ambassador does not seem willing, or able,
to make an actual response to my statement.
Mr. Marine Comments:
The Albrook fiasco was that in their anxiety, those that were so
anxious to help Hutchison Whampoa gave away to this affiliate of the
Communist Chinese military not only Albrook Air Field but also other
lands that included those adjacent to Panama's FAA and those around two
private Panamanian companies. Thus, the effect was to extend the land
control of Hutchison Whampoa five miles into the Zone rather than one
and to include strategic stretches of the transiting railroad and both
highways, a tactical disaster from a national security standpoint. One
of the two private companies whose lands were given to Hutchison
Whampoa was a company that is co-owned by the present president,
President Balladares, and Mayor Alfredo Aleman. Mayor Alfredo Aleman,
it is important to note, was forced by the U.S. to resign as the
president of Panama's Central Bank before the U.S. would certify Panama
as a country that was carrying out its responsibility to help in
fighting the drug problem. The degree to which he is involved in these
matters is ominous for Panama from two perspectives. It is a threat to
Panamanian and also U.S. security just because of the power and
corrupting influence of the narcotics traffickers, but it is also a
threat to the security of both nations because of the cooperation it
indicates between the drug traffickers and the Chinese Communist
commercial front operations. Significantly, the annex to Law #5 which
revealed this information for the first time was not disclosed until
one year after the law was pushed through. I have also talked to people
at Bechtel who were involved in its attempts to obtain rights as a
result of the privatization of the air field. They told me that not
only were they not to be given the air field, but that Bechtel, as a
major U.S. company, would only be allowed, by comparison, a small
amount of land in the port area. In the package that they were told was
the only possibility for Bechtel there was no inclusion of any option
or extension for Rodman and Tellers Island as has been given to the
Chinese Communist affiliated Hutchison Whampoa. There were other sundry
differences as well that demonstrated a greater willingness to assist
Hutchison Whampoa in obtaining rights that threaten Panamanian and U.S.
security that were not offered, even as a possibility to Bechtel, which
would have tended to protect the security interests of both countries
by comparison if they had come under the control of a major U.S.
concern such as Bechtel.
Under the present arrangements between Balladares and his cronies
and Hutchison Whampoa, if Panama and the U.S. were to reach a deal on
maintaining some American military bases after the Treaty runs its
course, Chinese Communist interests could match the U.S. offer for
Rodman and preemptively take the bases in the stead of the U.S. In 1995
and 1996, while the Ambassador and then Foreign Minister Gabriel Lewis
Galindo were close to concluding a base agreement in which Rodman was
part of the deal. Suddenly, however, in late 1996, Rodman was taken off
the table as a possibility for a continuing U.S. base and the reason
given was that it was to go instead to the Chinese Communist affiliated
Hutchison Whampoa. This is a concrete illustration that there are
strategic and not just purely commercial interests driving these things
and that in fact the commercial goals are subsidiary to the strategic
interests.
If we are to take Ambassador Hughes at his word, then the Hutchison
Whampoa/PLA interests might not get Tellers Island for development, but
in fact, what he does not reveal, is that they already have. In June of
this year, 1998, the Government of Panama under this agreement, and
Hutchison Whampoa/PLA signed an agreement that would allow Hutchison
Whampoa interests to start developing Telfers. It is incredible that
Ambassador Hughes cites the fact that Tellers and Galeta are four miles
apart as if that were a protection rather than an exposure. Both
Admiral Moorer and Ambassador Hughes acknowledge that this project is
known as the Gran Muralla or Great Wall. Obviously the Admiral, from
his knowledge and experience, and the importance of Galeta as a
strategic communications center, does not share the Ambassadors rosy
view of the symbolic significance of this name. Perhaps he has in mind
how the Soviets gave the U.S. a bugged embassy in Moscow while the
Soviets in turn took the best sites in Washington for monitoring all
U.S. military and strategic communications in and out of the capital.
Another disturbing aspect of this deal from the perspective of Panama
is how, again, the Communist Chinese are taking back with the left hand
what they appeared to have given with the right. Panama will have to
give an additional discount to the Hutchison Whampoa interests of $60
million over 6 years. This means another reduction, in the amount of
$10 million in each of those six years, from the $22 million per year
which Hutchison Whampoa bid to beat out the other bidders for the port
concessions. If Telfers is worth $60 million and generates revenues,
then the Chinese military will have succeeded in making Panama, in
effect, pay for the excess which it bid to win the concessions while
expanding its revenues from the acquired concessions and at the same
time increasing its strategic advantage and its threat to the security
of Panama and the U.S. And if the agreement is interfered with by the
U.S. in order to protect its security interests and violations of the
Treaty then Panama is required to indemnify the commercial arms of the
Chinese military for the U.S.'s having caught out the Balladares gang
violating the treaty for gain. After all the above figures only refer
to moneys above the table. The Panamanian press has exposed the
existence of considerations under the table.
Ambassador Hughes:
The Admiral's Call for Action
Admiral Moorer noted that a clause was inserted at the end of Law 5
which states that if a conflict between provisions of Law 5 and
provisions of the Panama Canal Treaty occur, the Canal Treaty prevails.
He asserted that this clause is ``meaningless if the U.S. Government
doesn't act now.''
The relationship between Law 5, the Treaties, and the PCA Organic
Law was outlined above. The Admiral does not explain why he thinks the
safeguards are meaningless, and Embassy and PPC do not agree with this
assertion.
Admiral Moorer Replies:
Ambassador Hughes' comments are evasive inasmuch as they assume
that the only considerations of importance are commercial and economic
which can be addressed somehow in some vague way through the internal
laws of Panama, options to intervene, and, in one instance, through
arbitration procedures under the rules of the International Chamber of
Commerce. This is to ignore the strategic considerations which we as a
nation are entitled to invoke under the Treaty, particularly as
modified by the United States Senate. As I have stated, we are talking
about a time frame of from hours to days in which to move a vast number
of support ships through the Canal to meet a major contingency or
outright hostilities to support our forward deployed forces. The
phrasing of that language in the Treaty which addresses our national
security concerns is to be interpreted as applied in a military and
strategic sense if it is not to be meaningless. The Ambassador is
engaged in a process of denial which has been embraced by all who are
attempting to shift attention away from the violations of the Treaty
which appear to be occurring and require immediate investigation and
analysis, followed quickly by swift and effective remedial action. At
the heart of this denial is an unwillingness to face the reality of a
totalitarian government such as that of Communist China and how it
operates in a much more monolithic fashion than a Republic such as ours
does. There is no separation between commercial and strategic
considerations on the part of the controlling party elite of Communist
China, any more than there was in the former Soviet Empire. The Party
elites in turn, through operatives in all units of the armed forces,
control the armed forces of Communist China. The armed forces of
Communist China, in turn, and in this they are slightly different than
the Soviet model, control the biggest business operation in Communist
China. As a business, the military is bigger than all of the other
businesses of Communist China combined. Some of its operations, and
there are literally thousands, such as COSCO, and China Resources, have
become known to committees of this Senate and through reports in the
maritime and Asian business press. But we seem in the grips of a
paralysis as far as fully analyzing the strategic implications of this
operation.
The Chinese military has studied and learned from all of our
military actions since Korea. Its operatives, under this administration
have, believe it or not, been brought into the Pentagon itself and into
all branches of our military operations, where their aggressive
gathering of intelligence on our military operations have become
legendary. Under a system such as theirs, moreover, all ``students'' in
this country, and there are thousands, also are assigned to the care of
party or government overseers and are used to gather intelligence.
Correspondingly, however, our studies of the strategy and tactics of
the Chinese Communist military appear to have had artificial
restrictions and to have been dominated in some cases by ideas that
appear faddish. Preoccupations in recent years, for example, with
information warfare and such things as urban warfare appear to have
resulted in a blindness to the obvious.
The architect of our present Naval superiority was Alfred Thayer
Mahan who, in the late 19th Century began to point out the importance
of the interaction of commercial and strategic considerations in the
Pacific in particular. Ironically, as we come to the end of this
century we seem to have forgotten those lessons. Our ``nodal analysis''
of key strategic points in ocean shipping underlying and necessary to
the operation of our two ocean and forward deployed strategy in times
of conflict seems to have been neglected even as the Chinese have
increased their study of these matters and quietly moved to cut off our
ability to support our technical Naval and military superiority where
they realize they could not confront it directly for a number of years
yet. This should come as no surprise. For, it is a concept which they
have successfully employed for literally thousands of years. The
principle of their great military strategist. Sun Tzu, in his famous
work, The Art of War, is that the surest way to defeat an enemy is to
make sure that you do not have to actually go to war to defeat him.
This is to be done, under the lessons of this master of strategy, by
rendering us unable to support our technically superior fighting
capacity through a control of the ocean commerce necessary to support
it in actual conflict. In times of actual conflict 80 percent and more
of our supplies and weaponry and personnel must move by ocean commerce.
We are only as strong as our weakest link in this vital commerce. That
weakest link is the Panama Canal. It is astonishing to hear a man who
is an ambassador of the United States of America standing together with
an arm of the commercial operations of the Chinese military, the Panama
Ports Company (PPC), against the carefully weighed considerations of
those who, by education, training , and experience, have spent a
lifetime learning how best to preserve our national security under any
and all circumstances and have been repeatedly called upon to do so.
Truly the misrepresentation and evasion in these comments of the
Ambassador constitute a type of ``information warfare'', with which
many in government have been preoccupied in recent years, but it is
being directed not against, but in cooperation with, the principal
strategic enemy seeking to employ it against us, and thus is directed
not to those whose intent it is ultimately to dominate us in the coming
century if they can but rather against the interests of our own
national security.
Mr. Marine Comments:
If having the Communist Chinese government via China Resource
Enterprises, COSCO and Hutchison control the access to the Panama Canal
is not enough, what is? If having such entities control U.S. ports,
U.S. bases, including Naval stations and military airfields is not
enough, then what is? Maintaining the ability to cooperate with the
majority of Panamanians to protect and defend the Canal, which is in
the national security interests of Panama as much as it is in the
national security interests of the United States, is one thing. Having
to take the Canal by force to protect the national security interests
of both Panama and the United States is quite another. If the United
States is excluded from appropriate security access and has to retake
the Canal by force then in order to do so it has to first take the
ports. This was shown in 1989 when the U.S. had to liberate Panama from
the control of the dictator Noriega (by whom I was imprisoned and
tortured) and the drug lords. When there were attacks upon the
liberating forces by the ``dignity battalions'', where did they come
from? They came from at the entrance of the Canal. The best defense for
the Canal is to have 10,000 troops stationed there full time, with full
tactical access to all necessary points of defense connected with the
Canal and the ability to maintain landing facilities for the quick
placement of an additional 100,000 ground troops into the Canal and its
approaches.
Ambassador Hughes:
Other Points
Admiral Moorer states that Law 5 is illegal because it runs counter
to the Panama Canal Treaty, and that the Treaty, ``calling for a
neutrality provision,'' is illegal because Panama did not sign it, nor
ratify it via the plebiscite. Panama signed the Treaty Concerning
Permanent Neutrality and Operation of the Panama Canal on September 7,
1977 and submitted it to plebiscite along with the Panama Canal Treaty
in late September 1977; it was ratified. The U.S. Senate also ratified
it. Article V of the Neutrality Treaty states that after the
termination of the Panama Canal Treaty, ``only the Republic of Panama
shall operate the Canal,'' but does not address the issue of port
operations.
Admiral Moorer expressed dismay and bewilderment that the U.S.
Government ``passively permitted'' Law 5 to happen. In principle, USG
supports privatization of state-owned facilities as a valuable tool in
rationalizing and modernizing economies. Unfortunately, the GOP
mishandled the process to the disadvantage of interested U.S.
companies. Ambassador Hughes, officials of the Departments of State and
Commerce, and the President's Special Envoy for Latin America made
repeated and forceful public and private protests over the lack of
transparency and a level playing field. Congressional delegations
visiting Panama expressed their concern to GoP officials. Certain
scheduled initiatives in Panama were canceled as a form of protest. The
privatization process and ports contract became a major issue in our
bilateral relations. It is inaccurate to assert that the USG
``passively permitted'' Law 5 to be passed That said, it is not clear
what legal authority the USG would have to impede the GoP from
privatizing its ports in this manner, or from agreeing to the terms
contained in Law 5.
Admiral Moorer Replies:
The bottom line is that the U.S. did not encourage the
``privatization of state-owned facilities as a valuable tool in
rationalizing and modernizing economies.'' By promoting a false and
misleading conception that for a communist military apparatus such as
that of Communist China ``commercial'' and ``trade'' considerations are
somehow separate from, and not inextricably connected with and
dominated by, strategic considerations, the administration promotes and
protects the transfer to control of the communist dictatorial
government of the People's Republic of China the ports and other
strategic choke points endangering our free passage through the Panama
Canal, which was built and has been defended with American and
Panamanian sweat and blood. There is nothing ``rationalizing or
modernizing'' about the PLA, Inc. Already its treatment of Panamanian
labor shows that. It is a dictatorial throwback that is out of synch
with modern free market economies on which the future of a world that
is free and secure depends. In China itself it is a massive user of
slave labor. Its military strategies are centuries old and we are not
even paying proper attention to their use against us on our very
doorstep. The Canal under PLA control is a dagger pointed at the
industrial heartland of America, particularly at the ports of the Gulf
Coast and the vast system of waterways that feeds into them, carrying
much of our heavy manufactures and materials and strategic materials.
Franklin Delano Roosevelt, prior to and leading into World War II, in
which I participated as a young Naval aviator, starting with the
bombing attack on Pearl Harbor, was particularly outspoken in the
newsreels and broadcasts of the day about just this very type of
attempt to control the Canal, as attempted by Nazi Germany and the
totalitarian empire of Japan and its Greater East Asia Co-prosperity
sphere. It is indeed unfortunate that today, not only do we not enjoy
such leadership, we have officers of our own government assisting the
strategic designs of the leaders of Communist China as they implement
them through their complex of commercial entities.
It is a serious misrepresentation to say that the Canal Treaty was
adopted. What the United States Senate adopted contained the DeConcini
amendments, specifically designed to strengthen our national security
in order to in turn secure that of Panama and to correct problems with
the Treaty as it came to the Senate which could have threatened our
security. The version that was put to plebiscite in Panama was not the
same Treaty and did not contain those essential provisions. Not only
that, a provision was slipped into the version that was submitted to
the Panamanian plebiscite which was specifically designed to destroy
our ability to intervene to protect our national security and render
the DeConcini amendments inoperable if allowed. There are other
problems with its supposed adoption. For example, President Lakas of
Panama was required to sign it and did not do so. I knew him and hunted
with him. He was a fine man and specifically would not sign it because
he knew of the intentions of the now departed dictators and their drug
lord friends with regard to it. Further, there is considerable evidence
that the plebiscite was fatally flawed with so much fraud as to not
represent the actual vote of the majority of Panamanians and their true
feelings on the issues it ostensibly embraced, even in the version
which was put to plebiscite. The corruption in the process, and the
differences in the two versions, go directly to concerns of our
National security. The blind posturing and ``business as usual''
protests to which the Ambassador refers are the very definition of
passivity in strategic matters, and, unfortunately, U.S. military
personnel will some day have to pay an unnecessary price for this
passivity unless we act now to correct it.
Mr. Marine Comments:
Actually, the evidence shows that Panamanians rejected the version
of the Panama Canal Treaty which was put to them in the 1977
plebiscite. The results were falsified to obtain the result desired by
a minority of Panamanians in league with the drug interests, and other
interests inimical to Panama's long term security. Similar frauds were
perpetrated in the 1984 and 1989 elections. The only reason that the
United States Senate ratified the treaty was the fact that the
DeConcini Amendments were added, and that they were not presented to
the Panamanian people because the Panamanian people would have
overwhelmingly favored them, perhaps to the point where they might have
mitigated or overcome the fraud. As a result the votes in the two
countries were on different treaties and there never was any one agreed
upon treaty that was voted upon in both countries and adopted.
As to the denial of ``passivity'' by the U.S. administration as Law
#5 went forward: The Department of Commerce is mentioned. Yet the only
contact by the U.S. Department of Commerce while Law #5 was going
forward was during the week that the bids were actually received, and
that was an unsuccessful attempt by Secretary Kantor to make a phone
call. According to the Panamanian press his call never got through.
The only protests by the American Department of State involved a
protest about corruption involving which was proven concerning
associates of Torrijos and Villareal taking a $50K bribe for a lot on
the ports for an American company, Saybolt. The President of Saybolt
was arrested and faces charges in Boston for violating the Foreign
Corrupt Practices Act. Yet the enormously larger corruption involving
the Chinese Communists interests was not taken note of by the U.S.
administration. Even Panamanian Senator Leopoldo Bennedetti has stated
that bucket loads of money were paid for the port. The Saybolt bribe
was only a drop in those buckets. The U.S. minor corruption was exposed
but the much greater corruption involving the Communist Chinese was
unremarked by the U.S. administration even though its purposes were
clearly strategic as well as commercial. For two years Saybolt, an
American company from Massachusetts, tried to get the small lots
without paying bribes but was told pay if you want to play and get the
lots. Finally they caved and paid and were very quickly exposed and
caught. In the meantime, Torrijos and Villareal, taking the Saybolt
money only to expose them, were involved in the receipt of much greater
amounts as they were writing into Law #5 for the Communist Chinese
Hutchison affiliate that these arms of PLA, Inc. could raise the rent
on contracts with companies like Saybolt or cancel them altogether.
The picture given by Ambassador Hughes to the U.S. congressmen
coming down to Panama to check on things has omitted essential details.
He has consistently told them that Hutchison Whampoa is a Hong Kong
British company without revealing that is a former and old British Hong
Kong trading company that has been totally taken over by Li Ka Sheng
and the interests of PLA, Inc., recast, and used as the hub of a
conglomerate empire of some 50 companies with many interlinks with PLA
entities, which number in the thousands. If an accurate picture had
been given to visiting members of the Congress, it is unlikely that
this quiet takeover would have gone virtually unrecognized for the
threat which it presents as long as it has. How much faith can we in
Panama have in U.S. administration spokesmen that have covered up what
has gone on in Panama, and prevented even those officially in charge in
its own State Department from knowing about these matters as they have
progressed? The fact that Ambassador Hughes now states that the
administration knew of what was going on all along is more like a
confession than a contradiction of the Admiral's assertion of
passivity. It is to admit that the administration knows of the ever
increasing Chinese Communist influence and control and prefers to seek
to divert attention from the alarming reality of the situation by its
absurd pretension that in a communist country such as the PRC the
commercial and trade interests are divorced from and totally separate
from strategic considerations and military influence and control. The
bottom line is that these Chinese communist entities have effective
control of former U.S. bases as ports, and of bases and, as a practical
matter, the functions of the Canal.
As to what the U.S. could do: it could order Panama to remove all
Chinese Communist commercial front influence from the ports as a
violation of the Treaty, if it has the will. Such decisive action would
be welcome in Panama and the U.S. Panamanians, except for a small but
vocal minority, are fervidly anti-dictator and anti-communist. The U.S.
should never forget that in the 1989 liberation of Panama 24 U.S.
soldiers died. There was also the murder of U.S. Sgt. Zak Hernandez, by
a member of the same corrupt group that is in league with the drug
lords and the communists.
At present such will is lacking. Ambassador Hughes has not
responded to Admiral Moorer's national security concerns. Instead he is
trying to change the subject. In a familiar technique in this
administration, he is ``compartmentalizing'', and attempting to focus
all attention on commercial aspects of the PLA Inc. as if they were
separate private commercial entities divorced from the strategic
considerations of the PLA and communist party controlling entities. The
bottom line is that affiliates of the Chinese Communist military
control the most important and strategic ports, and effectively control
the U.S. bases and the functions of the Canal itself. Li Ka Sheng was
offered the governorship of Hong Kong as the PRC moved in but turned
the offer down in order to keep on working with them through his
monopoly leverage as a chosen instrument of the PLA, Inc. Control of
the ports is control of the Canal. Li Ka Sheng, strategically, is the
PLA.
Why was the ambassador not aware of what was in the Law #5 treaty
and agreement until 8 days before the Chinese Communist affiliated
Hutchison Whampoa company physically took over? Why has he not
disclosed to visiting Congressmen the true nature of Hutchison Whampoa
and its connections to the PLA commercial/strategic conglomerate
empire? Why does he defend the enemies of Panamanian and U.S.
democracies, even after the revelations I have described? This is not
an accident, this is policy. In Spanish there is a saying: A otro perro
con ese hueso ! ``To some other dog with that old bone !'' The
Ambassador evades too loudly. This is not just passivity; it is
purposeful passivity.