Canal question has already established itself as the hottest political
issue for the coming year. Ronald Reagan, who almost rode to the
Republican nomination last year on a promise to keep the canal,
is back again, leading the powerful forces opposing the new Carter
treaties with the government of Panama. Alert to the polls that
show that Americans are overwhelmingly opposed to giving up the
canal, the Republican National Committee and most Republicans across
the country have gleefully seized upon this issue, thus going flatly
against the counsel of former President Ford, who vigorously supports
In the liberal
and "moderate" press, the contending forces are lined
up in an all-too-familiar morality play. Opposed to the treaty are
reactionaries and jingoists, emotionally and irrationally devoted
to the mystique of American "sovereignty" in a foreign
land; in its favor are sensible and moderate internationalists,
people who believe in friendly cooperation between the United States
and Third-World nations and who wish to jettison the last remnants
of a nave and outdated American imperialism left over from the
innocent if clumsy swaggering of Theodore Roosevelt. What could
be a more clear-cut moral lineup: for the treaty, all the good guys,
from Carter to Ford to the New York Times and the Washington
Post; against, all the certified Bad Guys from Reagan to the
American Conservative Union to the John Birch Society?
But you can’t
always tell all about the game from a list of the players — and
there is more to be said than the standard account in the Establishment
media. The Reaganite bluster about sovereignty can easily be dismissed;
there are, however, more important questions about the new Panama
treaty: Does it really abandon US imperial domination of the canal
and the Canal Zone? Does the treaty really turn this area of Panama
back to the Panamanians? If we consider the treaty in the light
of these questions rather than in relation to jingoist notions,
we will come up with a very different view of the big political
issue of the year.
revealing are the statements of high American officials and other
advocates in assuring the American public of the fallacy of right-wing
fears about the treaty. Thus, Henry Kissinger announced his "strong
view" that the treaty "is in the national interest of
the United States." Kissinger went on to explain that "the
new treaty marks an improvement over the present situation in that
it assures continuing, efficient, nondiscriminatory, and secure
access to the Panama Canal with the support of the countries of
the Western Hemisphere instead of against their opposition and eventually
In short, it is better to stay in more subtly and induce Panama
and the rest of the world to support our dominion than to stay in
nakedly and face the hostility of the Panamanians and most other
In his public
statement announcing the agreement on the basic elements of the
Panama treaty, President Carter stressed that he and the Joint Chiefs
of Staff agreed that the pact will be "important to our long-term
national interests." Specifically, the United States will formally
continue in charge of the canal until the year 2000: "We will
have operating control and the right to protect and defend the Panama
Canal with our military forces until the end of the century."
But even after that "we will have the right to assure the maintenance
of the permanent neutrality of the canal as we may determine necessary.
Our warships are guaranteed the permanent right to expeditious passage
without regard to propulsion or cargo."
Or, as the
Carter administration’s summary of the Panama agreement put it,
"The U.S. will have the permanent right to defend the neutrality
of the canal from any threat, for an indefinite period." President
Carter himself has stated flatly, "If it is attacked by any
means, I will defend it." He has assured the public that "if
we ever have to go into Panama, there will be no legal question
under these treaties."
In short, there are no limits in this treaty on the actions that
the United States will be able to take, even after the year 2000,
to preserve what it deems to be the "neutrality" of the
Thus, in exchange
for the mystique of sovereignty and formal national ownership, the
United States has acquired the agreement of the Panamanian government
in its perpetual ultimate control of the canal. Or, as Ellsworth
Bunker, one of the two American negotiators of the treaty — the
other was Sol Linowitz — admonished the critics, "It is not
ownership but use that is important." He could have added the
fact that the ability to use and control property is precisely the
function of ownership.
When the new
treaty was announced, Bunker and Linowitz spelled out one of its
major advantages to US dominion. As the August 13 New York Times
phrased it, Bunker and Linowitz "said they thought that continued
operation of the canal was threatened more by possible Panamanian
sabotage or disorders that might follow a failure to carry out the
agreement than by external threats that they asserted the United
States would be free to curb."
fascinating is the argument on behalf of the Panama treaty by the
most sophisticated of American conservative organs, National
Review. National Review begins its editorial by assuaging the
hurt to the "national pride" of conservatives, and assuring
their conservative followers that it understands their "soul-searing"
pain. Then, NR proceeds to instruct its constituency in the
realities of today’s world. "Conservatives are realists, and
here is a test of realism." Specifically, and echoing Kissinger,
Linowitz, and Bunker, NR points out that "our own military
men support the treaty on the ground that the canal can be better
defended with the treaty than without it." First of all, under
the new treaty Panama agrees that the United States may continue
to use its air and sea forces to defend the Panama Canal against
an external attack. NR then turns to the "most realistic
kind" of military threat to US rule over the canal, namely
"guerrilla warfare, and defense against that is very difficult
under any circumstances." And then NR adds the clincher:
"One thing is sure — it could be done far better together with
Panama than without it; or worse, against it." In short, the
Panamanian government would now be ranged against such guerrilla
warfare rather than overtly or covertly supporting it.
a common fear of the treaty critics, NR supposes that Panama
violates the treaty. In that case, the magazine concludes, "we
will still be in a position to act if and when necessary. And what
is most important, we would almost surely be in a stronger position
to act at some later time in response to an actual threat or violation
of the treaty than we would be now in defense of our own refusal
In other words, far better for the United States to exercise its
power in defense of a treaty — and therefore in command of wide
international support — than in isolation after refusing to ratify.
In a similar
vein, Carter’s national security adviser, Zbigniew
Brzezinski, told a White House meeting of prominent Georgians
and Floridians that "if he were in the Kremlin and he could
think of anything that … might alienate countries against the
United States even further, it would be defeat of these treaties."
A common conservative
charge is that the treaty will hand over the canal to a "Communist"
Torrijos regime in Panama. Far from being a "Communist,"
however, General Torrijos is in hot water in his own country, especially
among the anti-imperialist critics on the Left.
newspapers were highly reluctant to reveal to their readers the
details of the agreement with the United States. The New York
Times reported that "rather than expressing joy at the
culmination of the long negotiations, most Panamanians appeared
today to be uncertain and confused. " Addressing a meeting
of the Panamanian Student Federation, that country’s chief negotiator
of the agreement, Dr. Romulo Escobar Bethancourt, admitted that
many aspects of the treaty were "bad" and even "ugly";
in defense, Escobar demagogically posed the only alternative to
the treaty as a "confrontation" with the United States
and the "massacre of the best of our youth."
Panama government announced its intention to hold an early national
plebiscite to decide on ratification of the treaty, but it is clear
that the plebiscite, which endorsed the treaty by two to one, was
held in the midst of a propaganda campaign branding any criticism
of the treaty as "treason against our fatherland." More
important, it was held while many of the leading opponents of the
treaty were languishing in exile. For, over the past three years,
the Torrijos regime has systematically deported its most outspoken
critics, including likely opponents of the new treaty, to Miami,
Mexico, and Venezuela.
of the major unsuccessful demands of the Panamanian Left was that
Torrijos keep his promise to declare a general amnesty for political
prisoners, and that he allow all the exiles to return to Panama
and challenge the treaty. In the light of this situation, it must
be considered a joke in questionable taste for Dr. Escobar to condemn
the Panamanian exiles in Miami for urging US senators to vote against
the treaty. Obviously, a simple way for Panama to put a stop to
this activity would be to allow the exiles to return to their Panamanian
full and fair debate over the plebiscite was precluded by the Torrijos
regime’s iron control of the media. Every one of the newspapers
and television stations is owned or controlled by the government,
and the radio stations are also effectively ruled by the regime.
and restrictions on public assembly were officially lifted during
the 40 days prior to the plebiscite, but Torrijos refused to grant
any additional time for public debate. As Marlise Simons reported
in the Washington Post of October l3, "Officials say
that Panamanians know enough about the treaties and only troublemakers
want more time."
of the treaty has come from conservative as well as leftist critics
of the Torrijos regime. The conservative Movement of Independent
Lawyers of Panama has denounced the treaty for approving the "first
American intervention in our country of the twenty-first century."
The MILP went on to assert that "the ordinary Panamanian will
easily understand that … there will be a new version — perhaps
slightly less grotesque than before — of the hated American perpetuity
on the canal issue." Both the Christian Democratic and Social
Democratic parties also came out against the treaties, "pointing
out that in 1926 and again in 1947, Panama had rejected drafts attempting
to legalize the U.S. military bases [there]."
And Panama’s Trotskyist Revolutionary Socialist League made the
significant statement that the present would be a particularly auspicious
time to confront American imperialism: "Today we have the eyes
of the world on us, today we have international support, today imperialism
has been weakened by Watergate and Vietnam."
September 6, the Panamanian Left made known its displeasure with
the treaty; 1,500 students demonstrated in Panama City against the
"dirty treaty" and its provisions for maintaining American
military bases and perpetual rights of American intervention. The
protest was stamped out by Torrijos’s National Guard, which injured
dozens of demonstrators and arrested over 30 students.
If the Panama
treaties merely provide a sophisticated fig leaf for continued American
domination of the canal, why then did the Torrijos regime sign the
accord in the face of the domestic troubles that would predictably
ensue? One answer to this question might be that venerable motive,
money — a vital aspect of the treaty is US agreement to sugarcoat
the pill by multiplying manyfold the annual revenues going into
the coffers of the Panamanian treasury. Currently, the US government
pays $2.3 million a year to Panama for use of the canal. The treaty
proposes to increase this amount by giving Panama $0.30 per ton
out of the current canal toll of $1.29 per ton. With corrections
for inflation, this share is expected to amount to a revenue of
$40 to $50 million per year. In addition, operational revenues will
be paid for such services as ship repair and dockage; this is expected
to amount to $20 million per year.
But this is
far from all. The United States also pledges to undertake a five-year
program of supplying financial goodies to Panama: $200 million of
Export-Import Bank credits; $75 million in Agency International
Development housing credits; and $20 million in loan guarantees
from the Overseas Private Investment Corporation. This amounts to
a five-year boodle of nearly $300 million, which, added to $70 million
per annum, makes a handsome subsidy package, and is perhaps worth
the risk of a few student demonstrations.
the Carter administration feels that it can sell this package to
the American public with the argument that none of this money will
come directly out of taxes. The annual sum will initially come out
of the toll revenues of the US government-owned Panama Canal Company,
and later out of the budget of the new, frankly governmental American
agency that is scheduled to replace the Panama Canal Company in
running the canal. The five-year plan, too, consists of loans and
loan guarantees. While all this is ultimately guaranteed by the
US taxpayer, the subsidy package, being long-run and indirect, might
be slipped by the American taxpayer without causing an outcry.
the money enables us to ponder the seemingly curious phenomenon
that American big business, unlike our conservative ideologues,
is overwhelmingly in favor of the Panama treaty. The advocates include
such influential business leaders as Irving S. Shapiro of DuPont,
head of the Business Roundtable and such groups as the National
Association of Manufacturers. One general reason for this support
is that these sophisticated business groups understand and welcome
the treaty as a more subtle and acceptable form of American imperialism.
A more specific reason is the effect the treaty will have for those
firms with trade and investment in Latin America. Rejection of the
treaty might mean anti-American unrest throughout the region and
might have a "destabilizing" effect on American investments
there. Private US investment in Latin America is estimated at $24
billion, while total two-way US trade there amounted to $34 billion
in 1976. As John M. Goshko reported in the August 22 Washington
factors could produce some startling surprises about where different
interest groups line up in the battle.
the strong likelihood that the normally conservative, Republican-leaning
business establishment will be solidly on the side of a Democratic
business community is concerned, Carter administration strategists
contend, the case for supporting the treaties seems ironclad.
In fact, the administration privately is counting on big business
to provide some potentially crucial help in getting the treaties
past the hurdle of Senate ratification.
R. Geyelin, president of the Council of the Americas, a nonprofit
business association comprising every major US firm doing business
in Latin America, has testified on behalf of such a treaty before
the House Panama Canal Subcommittee.
in terms of groups or classes are never as rewarding as the concrete
unveiling of specific monetary interests. Thus, there needs to be
further investigation of which US business or financial groups might
be benefiting specifically from the hundreds of millions of dollars
that the US government will be pouring into Panama. One clear group
of beneficiaries is the American exporters who will receive orders
from the $300 million package. US foreign aid is a clever mechanism
by which American taxpayers and the US government subsidize American
export firms: the dollars are extracted from the taxpayer and are
then funneled by the US government to the foreign recipients, who
in turn spend the dollars on American exporters. In this case the
process is clear: the Panama treaty explicitly applies "Buy
American" provisions to the aid, making sure that the American
exporters receive the dollars as rapidly as possible.
But there is
another use that the Panamanian government will have for the US
aid, one that may prove to be a more intimate lead to the underlying
reason for concluding this treaty. Panama is heavily in debt to
US banks, and the influx of hundreds of millions of dollars will
certainly ease its burden in paying the interest and principal on
the debt; it may even save Panama from bankruptcy — and the American
banks from severe embarrassment. We must therefore contemplate the
possibility that the nub of the Panama treaty is a covert bailout
operation by which the American taxpayer is being gulled into subsidizing,
and even salvaging, a handful of US banks.
does not seem very outrageous if we consider the history of how
the United States got involved with the Panama Canal in the first
place. It’s not just, as Senator Hayakawa (R-CA) said, that "we
stole it [the canal] fair and square." Or that President Theodore
Roosevelt engineered a phony "revolution" in 1903, by
which employees of the American-owned railroad declared the Panama
section of Colombia independent and American ships prevented Colombia
from putting down the rebellion. The similarity with the present
theme comes from the hidden motive behind Teddy Roosevelt’s flamboyant
In order to
build the canal, the United States felt that it had to purchase
the right to do so from the bankrupt French-owned company that had
failed in its attempt to dig the canal. Teddy Roosevelt explained
that he acted out of indignation at the Colombian government’s insisting
on a $10-million "holdup" of American taxpayers for the
right to build a canal in Panama. Actually, the US government was
perfectly willing to pay $40 million to the French Panama Canal
Company. The $10 million to Colombia would have come, not from the
taxpayers, but out of the $40 million cut going to the French company.
did Teddy Roosevelt swing the big stick and foment a phony revolution
in Colombia, in order to save $10 million for the coffers of a bankrupt
French-owned company? The answer, which came out years later, is
that the "French" company was French no longer; its shares
had been secretly bought up shortly before by a syndicate of Wall
Street bankers, headed by J.P. Morgan and Company. The syndicate
hired the eminent Wall Street lawyer, William Nelson Cromwell, to
get the American money, and it was Cromwell, sitting in the White
House itself, who wrote TR’s dispatches and orders and engineered
the entire operation. After the syndicate got the $40 million, they
were able to sell their shares to the US government for twice what
they had paid.
of the syndicate members was none other than Teddy Roosevelt’s brother-in-law,
Douglas E. Robinson. Not only did Robinson benefit as a syndicate
member, but most of the $40 million from the US taxpayers was funneled
by Cromwell into the New York real estate firm of the same Douglas
And so we should
not be surprised to discover that US government action in Panama
today is for the purpose of subsidizing the Wall Street bankers.
Judging from the facts available to us, the current treaty may well
be a rerun of the original bailout.
banks refuse to make public the details of specific loans like those
to Panama, and the Panamanian government is not exactly generous
with such information either. However, some broad information is
available. When General Torrijos seized power in the 1968 coup,
Panama’s national debt abroad was $167 million; its estimated total
current debt is more than $3.5 billion. More pertinently, the total
debt of the Panama government to US banks is reported by the Library
of Congress at $1.7 billion. In a memorandum to the president of
Panama, the Department of Planning stated that no less than 39 percent
of Panama’s budget is being used to service its foreign debt, which
amounts to $42 million per year and includes $25 million in interest
and $17 million in amortizing principal.
parade of American banks involved in Panama are the First National
City Bank and the Chase Manhattan Bank, the flagship bank for the
far-flung Rockefeller financial interests. Both of these banks serve
as fiscal agents for the government of Panama. In one advertisement
for a $115 million loan to Panama, for example, the First National
City Bank is listed as the agent for the loan. Other participating
banks included the Bank of America, Bankers Trust, Chase Manhattan,
the First National Bank of Boston, the First National Bank of Chicago,
the Republic National Bank of Dallas, and the Marine Midland Bank.
We might well
ask, why did the New York banks pour all these loans into Torrijos’s
Panama? It seems clear that the money was a quid pro quo for Torrijos’s
decision — on the advice of leading New York banks — to reorganize
Panama’s banking laws in July 1970. This reorganization provided
a favorable haven, free of taxes and onerous regulations, for foreign
banks in Panama, much as Panama has long provided a flag of convenience
for world shipping. Since the 1970 legal change, total banking assets
in Panama have expanded enormously from a few banks with a few million
dollars to 73 banks with total assets of $8.6 billion conducting
transactions throughout the world. Prominent among the US banks
expanding rapidly in Panama since the 1970 legislation are the First
National City Bank, the Bank of America, Chase Manhattan, and the
Marine Midland Bank.
It was a deal
that benefited the US banks and the Torrijos regime, which could
thereby expand its wealth as well as its political power in Panama.
But now the US taxpayer is being subtly asked to pick up the tab.
If a handful
of large US banks will be the major beneficiaries of the Panama
Canal treaty, have they also had any role in lobbying for or negotiating
the treaty itself? Or will their gains be merely a lucky windfall
from decisions made by the US government for very different reasons?
Let us see. While the treaty was being negotiated, then-Senator
Gale McGee (D-WY), one of the leading protreaty people in Congress,
held a meeting at the State Department at the end of October 1975
to organize a protreaty lobby. In attendance were lobbyists for
the Chase Manhattan Bank, the Bank of America, such large corporations
as Gulf Oil and Rockwell International, as well as representatives
of the Council of the Americas. A campaign kitty was raised at that
meeting, estimates of the size ranging from $100,000 to $500,000.
Subsequent meetings brought in lobbyists for other large banks and
corporations, including Pan American World Airways. Plans were made
at these meetings to pressure the US Chamber of Commerce into supporting
the future treaty.
of the bankers and the corporations, however, has been even more
direct. When Carter took office he appointed the dynamic and highly
Linowitz, former ambassador to the Organization of American
States and long an advocate of a new treaty, to join the octogenarian
Bunker on the Panama Canal negotiating team. Bunker himself
is a former director of Bankers Trust, and his brother, Arthur Hugh
Bunker, is a longtime director of Lehman Brothers.
connections are more numerous and impressive. He is a member of
the powerful Council on Foreign Relations, which is dominated as
well as chaired by David Rockefeller, who is also chairman of the
Chase Manhattan Bank. Moreover, Linowitz is a member of the exclusive
and now-famous Trilateral Commission, which was founded and is dominated
by David Rockefeller and which includes so many foreign-policy and
economic-affairs leaders of the Carter administration — from Carter
himself to Vice President Mondale, Secretary of State Cyrus Vance,
and National Security Adviser Brzezinski. In addition, Linowitz
is a trustee and former chairman of the policy committee of the
Center for Inter-American Relations, an organization founded and
chaired by David Rockefeller, whose directors interlock heavily
with the Council for Foreign Relations. Linowitz was also a member
of Nelson Rockefeller’s personal vehicle for his abortive presidential
run, the National Committee on Critical Choices for Americans. As
a member of the board of directors of Time, Inc., Linowitz also
wields a degree of influence on the media.
Even more pertinently,
upon his appointment as negotiator of the canal treaties, Sol Linowitz
was a member of the board and the executive committee of Marine
Midland Bank and of Pan Am. He was also a large stockholder in Marine
Midland. The Marine Midland connection is clear and direct; for,
as Congressman George Hansen (R-ID) has disclosed, the government
of Panama owes Marine Midland Bank nearly $8 million. Furthermore,
it was only after Hansen and Senator James McClure (R-ID) filed
suit on April 20 for a temporary restraining order against Linowitz
as canal negotiator that Linowitz finally resigned his positions
with Marine Midland.
The suit sought
the restraining order on the ground of conflict of interest on the
part of Linowitz, at least until this presidential appointment should
be confirmed by the Senate. Linowitz, however, insisted on keeping
his high positions at Pan Am while negotiating and arguing on behalf
of the canal treaty. Pan Am’s connection, while intriguing, does
not seem as direct as Marine Midland’s. Pan Am has for decades been
within the Rockefeller financial ambit, as is indicated by James
S. Rockefeller’s presence on the airline’s board of directors. Other
directors are Frank Stanton of CBS and Donald Kendall of Pepsico,
both of whom are directors at Atlantic Richfield Company, whose
president Robert O. Anderson is a member of the board of Rockefeller’s
Chase Manhattan Bank. Until he became secretary of state, Cyrus
Vance was also a director of Pan Am. While too much should not be
made of a list of corporate interconnections, the above establishes
a clear pattern of Linowitz-Rockefeller commonality of interest
We have already
seen that Pan Am participated in the McGee-organized corporate lobbying
in favor of a Panama treaty. What does Pan Am have to gain from
Torrijos? One obvious benefit is the protection of the company’s
landing rights in Panama. It just might be important that Panama
serves as Pan Am’s headquarters for Latin America.
of the most important influences in the drive toward a treaty was
the new Washington-based Commission on US-Latin American Relations.
The commission was organized in 1974 by the Center for Inter-American
Relations and was largely financed by Ford Foundation and Rockefeller
funds. Its chairman until recently was Sol Linowitz, with Dr.
Robert A. Pastor serving as the staff director. Other members
of the Linowitz Commission included such influential Trilateral
Commission members as W.
Michael Blumenthal, who is now secretary of the treasury; Samuel
P. Huntington, now an aide to the National Security Council;
Peterson, chairman of Lehman Brothers; and Elliot
1976, Pastor wrote a report for the Linowitz Commission, urging
a new treaty and substantial funds for Panama; the Council on Foreign
Relations promptly held a special colloquium on the subject and
endorsed the Linowitz Report. The next month, Brzezinski, national
security adviser to Carter, appointed a special assistant on the
Panama question, who turned out to be none other than Dr. Robert
Pastor drew up a National Security Council memorandum recommending
a new Panama Canal treaty. The paper was approved by Brzezinski,
and then, after being checked out with longtime Nelson Rockefeller
foreign-policy aide Henry
Kissinger, endorsed by Carter. As the culmination of the Linowitz-Rockefeller
drive, Linowitz then got himself appointed negotiator for the new
There are several
ironies that emerge from a careful look at the Panama Canal treaty
fight — especially the picture of this country’s liberals and progressives
battling to pour money into the coffers of a handful of Wall Street
banks in the name of a treaty they mistakenly believe represents
a withdrawal of US power abroad. It doesn’t, and those who automatically
oppose anything the right wing favors need to do some hard rethinking
of their reflexive support for the new Panama Canal treaties.
New York Times, August 18, 1977.
New York Times, August 13, 1977.
Los Angeles Times, October 23, 1977.
For a confirming view, see the report on the broadcast by Sol
Linowitz over the Voice of America, in Harry B. Ellis, "Carter
Still Presses for Canal Treaty," Christian Science Monitor,
August 31, 1977.
Actually, it is unclear that even our existing status in Panama
is one of sovereignty and ownership over the Canal Zone. The 1903
treaty with Panama merely grants to the United States "in
perpetuity the use, occupation and control of a zone. " The
Supreme Court of the Canal Zone on May 6, 1907, in the case of
Canal Zone v. Coulson, ruled, quite in the spirit of the
treaty, that "the United States is not owner in fee of the
Canal Zone; it has only the use and occupation as long as it complies
with the terms of the treaty." It is true, however, that
the US Supreme Court chose to disregard such limits in the same
year, asserting that "the title of the United States to the
Canal Zone is not imperfect.’" (Wilson v. Shaw)
"The Proposed Treaty: Preliminary Thoughts," National
Review, September 2, 1977.
Don Irwin, "Rusk Sees Chance of War in Panama," Los
Angeles Times, August 31, 1977.
The other major charge by the Right is that Torrijos is a "dictator."
This is true enough, but the charge comes with peculiar ill grace
from a movement that has expressed its devoted admiration for
every dictatorial and fascist regime in the world, from South
Africa to Chile, South Korea, and the Philippines.
New York Times, August 11.
Washington Post, October 13.
New York Times, August 11.
See Russell W. Howe and Sarah H. Trott, The Power Peddlers,
N. Rothbard (1926–1995) was dean of the Austrian
School, founder of modern libertarianism, and academic vice
president of the Mises Institute.
He was also editor — with Lew Rockwell — of The
Rothbard-Rockwell Report, and appointed Lew as his
literary executor. See