711.192/77a supp.
The Secretary of State to the Minister in Panama (South)
Sir: In the Department’s telegram No. 56, of August 6, 6 p.m., 1924,15 you were informed that the negotiations between the United States and Panaman Commissions looking toward a more permanent international arrangement to take the place of the so-called Taft Agreement and to provide a more satisfactory basis for regulating existing relations between the two countries were in abeyance as a consequence of the departure from Washington of Dr. Ricardo J. Alfaro, Panaman Minister to the United States, who, by reason of the absence of Messrs. Eusebio Morales and Eduardo Chiari, was the sole member of the Panaman Treaty Commission remaining in this city.
The following brief account of the negotiations to date and their status at the time of Dr. Morales’ departure, as well as the enclosure which accompanies this instruction,15 is communicated to you for the confidential information of your mission.
The meetings of the two commissions, 21 in number, extended over the period from March 17 to August 6 last. The discussions were restricted for the most part to the points presented for consideration by the Panaman Minister in his Aide Memoire of January [Page 528] 4, 1924,15a a copy of which was sent you with the Department’s instruction No. 157 of January 17, 1924,16 and were based to some extent upon certain preliminary proposals advanced by Dr. Alfaro at a series of informal conferences which took place in February and early in March. The major part of the questions discussed offered no serious difficulties to an agreement and, after formal exchanges of views by the two commissions, were satisfactorily disposed of. The results of these deliberations are embodied in a tentative draft of the proposed treaty, a copy of which is transmitted with this instruction for your strictly confidential information only.16 This draft was prepared by the American Commission and modified in accordance with agreements reached at subsequent meetings with the Panaman Commission. It should be pointed out, however, that Articles II and IV as incorporated in the draft represent only partial agreements respecting their subject matter, and the inability of the negotiators to arrive at a mutually satisfactory settlement on these points, particularly the latter one, is responsible for the delay in concluding the treaty.
Article II relates to the proposal of the American Commission that Panama grant to the United States the use, occupation and control of a portion of the city of Colon required by this Government for the more efficient administration of the Panama Canal. The American Commissioners’ original proposal envisaged the cession of an area somewhat larger than that described in the draft under reference and offered as compensation therefor to remit the debt owed by Panama to the United States for the construction of water works, sewers et cetera, in Colon. A counter proposal of the Panaman Commission provided for the surrender by the United States to Panama of all property owned by the Panama Railroad Company in Panama and Colon, not employed for Canal purposes, in return for the proposed cession of land in Colon. This was rejected by the American Commission and the suggested pecuniary compensation was increased by an offer to repay to Panama the sums already paid by the latter on account of the original indebtedness for water works and sewer construction, thus making a total of about $1,250,000. The Panaman Commissioners declined to accede to this proposition and appeared, as was revealed by subsequent events, to entertain the intention of bargaining its acceptance of this proposal against the acceptance by the American Commission of Panama’s contention that the provision of proposed Article IV, in which the United States agrees to waive the exercise of certain [Page 529] commercial privileges in the Canal Zone, be made of permanent effect. As the American Commission was unwilling to go beyond its proposals as embodied in Article IV of the attached draft, an effort was made to reach a solution of the difficulty by decreasing the area sought in Colon to the absolute minimum consistent with the needs of the Panama Canal and by offering to cede a small portion of Cristobal abutting on Boca Chica to Panama. These last proposals are those contained in the draft and, as stated above, have not been accepted by the Panaman Commission.
Article IV of the draft relates to the temporary non-exercise by the United States of certain commercial rights in the Canal Zone and grants certain rights therein to the Republic of Panama. While the Panaman Commission appeared to be willing to accept the numbered sections which it contains, it declined to accede to the temporary feature of the article embodied in the final paragraph, and originally proposed, as an alternative, a limitation thereof of not less than thirty years. The American Commission, which had at first proposed a limitation of ten years after which the article would continue in force indefinitely unless denounced by either party on six months’ notice, found itself unable to accept this suggestion and proposed, as a compromise, that the period be extended to fifteen years, the article to remain in effect thereafter for successive periods of five years, unless denounced one year prior to the expiration of any such period. The matter remained in abeyance during the consideration of other subjects, and when conversations thereanent were resumed the Panaman Commission, as already stated, made the acceptance of their views that the article be of permanent effect a condition for their acquiescence in the American Commission’s proposals regarding the cession of land in Colon.
In these circumstances the Chairman of the Panaman Commission sought and obtained an audience with the President, in which he presented the views of his government regarding this question. The President reiterated the assurances previously given by the Secretary of State that this Government is animated by the friendliest feelings toward Panama, that it is not its desire to do anything that would harm Panama or its commercial prosperity, and that while the United States did not intend as a matter of policy to set up a commercial colony in the Canal Zone it could not give up its rights under the Treaty of 1903, but at most would agree to a non-exercise of certain of those rights for so long a period as it can safely foresee what its requirements may be. Similar assurances were conveyed to the President of Panama in the Department’s telegram of July 12, 2 p.m., to your legation.
From certain remarks made by Dr. Alfaro to officers of the Department as well as from several of your reports on the situation in [Page 530] Panama, the Department gained the impression that the Government of Panama might be entertaining the opinion that that country might lose nothing by not entering into the projected treaty, in the hope and expectation that, as a result of the assurances above referred to, no competing commercial establishments would be permitted in the Canal Zone which might interfere with the monopoly that would otherwise be enjoyed by the merchants of Panama.
The Department considered that, while the conclusion of the treaty under negotiation might be of greater advantage to Panama than to the United States, the substantial progress already recorded in the work of the Commissions afforded satisfactory solutions of the majority of the problems confronting the two Governments. The Department, therefore, felt that it would be unfortunate should a misapprehension of the intent of the President’s remarks to Dr. Alfaro lead the Panaman Government to terminate the negotiations. Accordingly, the matter was submitted to the President who authorized the following statement to be communicated orally to the Panaman Minister on August 4, 1924:
“The expression which the President gave in his conversations with Señor Alfaro and Señor Chiari, of the policy of this Government not to set up a commercial colony in the Canal Zone will of course not admit of such a broad construction as to imply any intention on the President’s part to limit the rights definitely accorded to the United States Government by the Treaty of 1903. Señor Alfaro had informed this Government that in entering upon negotiations for a new agreement after the abrogation of the Taft Agreement, Panama did not intend to assume the attitude of a nation whose interests were antagonistic to the United States, but desired to deal with the United States openly and frankly as a staunch friend. This Government has always been animated by like feelings and the President gave expression to this feeling in his statement of policy which was made not only in view of the friendly spirit expressed by the Panaman Minister but also in the belief that negotiations carried on in that spirit would eventuate in the conclusion of an agreement to settle difficulties which had arisen in the relations between the two Governments. Should a treaty not be concluded, the United States—while it will continue to be animated by the friendliest feelings toward Panama, and will continue as in the past to deal not only in a friendly but also in a generous manner with Panama—must reserve the right to act in such circumstances in accordance with the full rights granted to it by the Treaty of 1903. This frank statement is inspired through friendship for Panama and in order that there may be no misunderstanding regarding the scope of the President’s statement to the Panaman Minister.”
To this the Minister replied that he fully understood the situation; that the President’s friendly expression was of course not a limitation of the Treaty and that should there be no treaty the relations would [Page 531] be on the basis of the Treaty of 1903. It was for this reason that his Government desired the commercial clause in the treaty to be perpetual.
Prior to his departure on leave of absence, Dr. Alfaro informed the Department that he believed it to be the desire of his Government that the treaty negotiations should remain in abeyance until his return to Washington in October next.
I am [etc.]