[Congressional Record Volume 140, Number 138 (Wednesday, September 28, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 28, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                 THE PANAMA CANAL AND THE NEXT 5 YEARS

                                 ______


                           HON. PETER T. KING

                              of new york

                    in the house of representatives

                     Wednesday, September 28, 1994

  Mr. KING. Mr. Speaker, in just a little over 5 years, the Panama 
Canal will be transferred to Panama in accordance with the Carter-
Torrijos Treaty.
  The Panama Canal remains very important to the economic trade 
interests of the United States. We are the largest users of the Panama 
Canal with well over 50 percent of the cargo volume. Additionally, the 
metropolitan area of New York City relies significantly on the Panama 
Canal. According to the Port Authority of New York and New Jersey, some 
60,000 jobs in our area are the result of traffic through the Panama 
Canal.
  There are questions as to whether Panama has the capacity to operate 
the canal with the same safety and efficiency as the United States. 
Dealing with these questions, Robert R. McMillan, a fellow Long 
Islander and Chairman of the Board of the Panama Canal Commission, 
recently delivered an address in New York City to the Propeller Club of 
the United States. As a supporter of the American Merchant Marine, the 
Propeller Club has an obvious interest in the canal's future. After 5 
years on the Board of the Panama Canal Commission and having served as 
Chairman for the last year, Mr. McMillan's remarks will be of great 
interest to my colleagues.

                The Panama Canal and the Next Five Years

                        (By Robert R. McMillian)

       At the outset, let me set the stage for our discussion. The 
     Panama Canal is a business which employs some 7,500 people 
     and has annual revenues in excess of $530 million. The Canal 
     operates without any burden to the taxpayers of the United 
     States. Based on the annuity and commissions paid to Panama, 
     it can actually be said that the Panama Canal Commission 
     makes a profit. The Canal represents almost twenty percent of 
     the Panamanian economy. And while significant to the 
     commercial activity of the United States, the Panama Canal no 
     longer has as important a strategic military value as in the 
     past.
       What I want to deal with today is how the Panama Canal 
     Commission and the respective governments of Panama and the 
     United States are doing in the transition process--a process 
     which will transfer the Canal to Panama at noon on December 
     31, 1999. First, keep in mind that the Panama Canal is much 
     more than an international waterway. It is also a highly 
     sophisticated industrial-maritime business complex--and I 
     emphasize business. While obvious, it should be noted that 
     operating in Panama is not similar to conditions at the St. 
     Lawrence Seaway. The infrastructure in Panama does not have a 
     bevy of electricians, divers, communications specialists, 
     welders, carpenters, machine tool operators and other 
     technically qualified people ready for call at a moment's 
     notice. As a result, it is necessary to have in place, not 
     only skilled management and engineers to supervise Canal 
     operations, but it is essential to have the support crafts 
     available at all times. It is important to understand the 
     dimensions of the Canal as we lead up to a ``seamless 
     transfer'' to Panama in just five years. By ``seamless,'' 
     the Board of Directors of the Panama Canal Commission 
     means that there will be no perceivable bump in operations 
     as Panama assumes responsibility for the business. Such 
     will be the challenge for both the governments of Panama 
     and the United States as well as the Panama Canal 
     Commission and the entity to be created by Panama to 
     manage the Canal. It is extremely important that you 
     understand our mutual objectives and have faith in the 
     implementation of our plans.


                                 panama

       While all parties have a responsibility for the transfer of 
     the business, let me begin with Panama. Key to the success, 
     in our envisioned ``seamless transfer,'' will be the actions 
     of the Government of Panama. In that connection, I feel that 
     Ernesto Perez Balladeres, the newly inaugurated President of 
     Panama, could well be the right person at the right time. In 
     my meetings with him since his May 8 election, I have found 
     him decisive, full of confidence and greatly aware of the 
     burden he has to prepare Panama for effective stewardship of 
     the Panama Canal. In telling a friend about my confidence in 
     the new President, I was greeted with a smile and the 
     declaration, ``It doesn't surprise me. We are both Notre Dame 
     graduates!'' Add to this President Perez Balladeres' Wharton 
     School education, employment with a major international bank, 
     and political experience--and it is clear why people are 
     impressed with the new President. In preparing to assume the 
     Presidency, he has used business-like approaches to issues 
     facing Panama. In addition, he has selected many outstanding 
     people for important government posts--individuals who have 
     real ability and credibility. In addition, the new President 
     will have a ``workable'' majority in Panama's legislative 
     body, the National Assembly.
       I have absolutely no doubt about the capability of 
     Panamanians to run the Canal from the top to the bottom. 
     Gilberto Guardia, a Panamanian, has done a first-rate job as 
     Administrator. In all, Panamanians occupy almost 90 percent 
     of Canal positions. They are making the operating decisions 
     today--now--as I speak. Let me emphasize this point again. 
     Panamanians, as I speak, are making Canal decisions affecting 
     operations today and well past the year 1999. The transition 
     has been under way for over fifteen years and is 
     accelerating.
       In addition to the Administrator, two of the three top 
     Bureau heads are Panamanian. Panamanian managers are at every 
     level within the Canal organization. They are all performing 
     in an outstanding manner. I have little doubt that more 
     Panamanians will move into management positions over the next 
     several years, because that is the stated and unequivocal 
     policy of the Panama Canal Commission's Board of Directors. 
     This policy is fully supported by Canal management. The 
     concern expressed, by some government officials in Panama, 
     about having more Panamanians in management positions, while 
     somewhat overstated for internal political purposes, is a 
     constant reminder to the Commission of our responsibility 
     in this area. Believe me--we take the responsibility very 
     seriously.
       Of most concern to Panama should be the creation of the 
     entity which will assume responsibility for the Canal on the 
     date of transfer. The National Assembly has already passed 
     for the first time a new Constitutional Amendment which would 
     create the Panama Canal Authority. The current National 
     Assembly, which assumed office on September 1, will now have 
     to consider passing this measure for a second time in order 
     for it to become part of the Panamanian Constitution. 
     Insulating Canal business operations from day to day politics 
     in Panama is one of the major and most important features of 
     this proposed Amendment. Treating the Canal as a business and 
     not as an appendage of the government will be in the best 
     interests of all users and those working for the Canal. There 
     are now some doubts as to whether the Amendment will be 
     approved for a second time by the current National Assembly. 
     This is a decision for Panama. World shipping, anxious about 
     the future, will be carefully observing what substitute is 
     arranged should the Amendment be shelved.
       The importance of this Panamanian Canal entity is best seen 
     through some of the issues which must be considered. It will 
     have to consider toll-rates, negotiations with labor unions, 
     major capital expenditures committed to before 1999 and 
     delivered well into the next century (The Gaillard Cut 
     widening program is one example), budgets, financing, 
     insurance and many other details--all of which should flow in 
     an uninterrupted way through our ``seamless transfer.''
       Another area of concern is the enactment of laws which will 
     govern the Canal after 1999. Today, United States law covers 
     most aspects of the Canal business. While the proposed 
     Constitutional Amendment sets the tone and even incorporates 
     certain laws of the United States, further legislative action 
     by Panama is required. Codifying laws to cover ship 
     liability, procurement, ethics and an entire personnel 
     structure remain high on the list of priorities for Panama. 
     The Commission is currently cooperating with the Government 
     of Panama in drafting such legislation.
       While these issues and many more remain on Panama's plate 
     for consideration, I would be remiss if I did not comment on 
     the fine work of the Presidential Commission headed by J.J. 
     Vallarino. Mr. Vallarino, a Panamanian member of the 
     Commission's Board, took on the responsibility for his 
     country to develop the Constitutional Amendment mentioned 
     earlier and worked arduously to frame the core laws needed to 
     supplement the Constitutional Amendment. This Commission has 
     made significant progress and should be complimented for its 
     untiring and careful work.
       It is a given that most people can correctly observe the 
     scope of a problem. Fewer, then, have the capacity to lay out 
     the necessary plans. And still fewer have the capability to 
     execute the plans. With regard to the transfer, much of the 
     execution is up to Panama. The next five years are critical. 
     President Perez Balladeres has the ``watch'' during this 
     critical period. From what I have seen to date, I believe he 
     will lead Panama effectively through the transition process--
     so long as he is not distracted by internal Panamanian 
     politics.


               UNITED STATES AND PANAMA CANAL COMMISSION

       During the transition period, the Panama Canal Commission 
     must continue to maintain and operate a world class waterway. 
     In that connection, the Canal management must constantly 
     review operations to insure that innovation, creativity, cost 
     savings and dedication to efficiency remain high priorities. 
     There are several areas where the United States has a 
     responsibility. First, is the passage of President Clinton's 
     recommendations to the Congress for changes in the Panama 
     Canal Commission. Turning the Panama Canal Commission into a 
     Government Corporation is his key proposal. In calling for 
     the Commission to become a corporation, the President's 
     report said, ``As an agency with a commercial mission, an 
     organizational structure that allows market responsiveness 
     and operational flexibility is, most desirable.'' A 
     government corporation would be able to consider implementing 
     operating conditions and regulations more conducive to 
     transferring the Canal to a Panamanian entity--all which 
     could be assured by that entity.
       Other recommendations relate to greater Board involvement, 
     qualifications for Board members, the toll-rate process, a 
     study to cover budgeting, procurement, personnel, ethics, 
     audits and liquidation of liabilities. This proposed 
     legislation will probably be considered in the next Congress. 
     Passage of President Clinton's proposals are essential to 
     achieving a ``seamless transfer'' of the Canal to Panama.
       Another topic of importance is the continuing necessity to 
     increase the number of Panamanians moving into management 
     positions. The Canal has marvelous training programs which 
     are invaluable in meeting that objective. From the crafts to 
     off Isthmus courses at U.S. Government facilities and 
     universities, Panamanians are being prepared to handle the 
     business. Training of people is one of the critical elements 
     of our transition.
       The PCC has taken steps to help in the transition. The 
     Board of Directors, last April, created the Transition 
     Affairs Committee which is made up of two U.S. and two 
     Panamanian Directors. This Committee has the responsibility 
     to monitor and supervise transition activities of the 
     Commission. In addition, a special Office under the 
     Administrator and Deputy Administrator has been created to 
     coordinate transition matters within the Commission. The 
     Panama Canal Commission will also have to provide assistance 
     to the new Panamanian entity on a wide range of 
     administrative matters--some of which I referred to earlier 
     in these remarks. Full and open communications between the 
     Panama Canal Commission and the Panamanian entity to be 
     responsible for the Canal will be essential. This will 
     require some mind set shifts for both Canal management and 
     Panama.
       There is one other area of concern which is applicable to 
     both the United States and Panama. The preservation of Canal 
     institutional memory and building on the trust developed over 
     the last five years requires continuity in top management and 
     the Board of Directors. The wholesale replacement of U.S. 
     Board members would, in my opinion, seriously impact on 
     the transition process as well as Canal operations.
       Finally, from the viewpoint of the transition, I am 
     constrained to comment on the role of the U.S. military in 
     Canal affairs. It is a given that without the engineering 
     capabilities of the U.S. Army Corps of Engineers, in 
     cooperation with our Nation's industrial ingenuity, the Canal 
     would probably not have been completed. But, today is a new 
     day. Almost one year ago, I became the first non-Department 
     of Defense person to Chair the Board of the Panama Canal 
     Commission--and the Canal is still operating. That step sent 
     an important and positive message to Panama. The Panama Canal 
     should not be dominated by the U.S. Department of Defense. 
     The Canal must be viewed--again quoting from President 
     Clinton's report to the Congress--``As an agency with a 
     commercial mission. . . . .'' That is the right message and 
     example for Panama as we convert to a government corporation 
     and prepare to transfer the Canal.


                               Conclusion

       I have been privileged to serve on the Board of the Panama 
     Canal for the last five years. It has been one of the most 
     interesting experiences of my life. And I have to admit that 
     I am enthralled by the Canal. In fact, much of America has 
     had a love affair with the Panama Canal for some ninety 
     years. Our ties are deep and emotional. After all, it was 
     American perseverance, diplomacy, engineering, industrial 
     might and medical know-how which completed the Canal after 
     France's failure.
       But the Canal is much more than an engineering triumph and 
     complex maritime industrial business. When completed in 1914, 
     the Panama Canal was the world's most expensive peace time 
     project ever undertaken. It was completed ahead of schedule 
     and under budget. With President Teddy Roosevelt at its side, 
     the construction of the Canal also marked the entry of our 
     nation onto the world stage. Further, it fulfilled the 
     earlier visions which had inspired the explorations of 
     Columbus, Balboa and Magellan. The Canal truly remains one of 
     the World's wonders.
       The maritime industry and the entire world economic 
     community will be watching very carefully as the United 
     States and Panama prepare to meet the Treaty commitments. Our 
     customers want to continue doing business with the Canal. We 
     want to continue doing business with them. Our employees and 
     management are ready to uphold the traditions and world class 
     service provided by the Canal over the last eighty years. It 
     is now up to Panama and the United States to execute the 
     transfer and permit the dedicated employees to operate the 
     Canal without interference. As of this date, the ``seamless 
     transfer'' is definitely on track--with only understandable 
     caution lights flashing down the road.

                          ____________________