[Senate Hearing 105-672]
[From the U.S. Government Printing 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

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                                                                   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.