My understanding was it was in the same period of time, but we are talking about September.

I would only guess from recall that there was a public news release on this.

I can tell you what happened, from my informants.

The National Guard were not pleased with the study. They jumped Torrijos on this. This is part and parcel of their apprehension of the Leftist movement. They are not all Communists. There are a great number, like I said, that because of their nationalism, do not want that country to go Communist, and when Torrijos makes these moves, and he is apparently being influenced by others, and so forth, they strongly and in particular, in this case, they did, indicated by this other news media article, they object strongly, when he went to Cuba, and as far as your question goes, I can document, I think maybe at a later date, but I have not the document

now.

Mr. SNYDER. If you are able to do it, will you send it in?
Mr. DRUMMOND. Yes.

Mr. SNYDER. One last inquiry.

On the bottom of page 15 and the top of page 16, I find it interesting to note that in regard to the Government of Panama three areas of interest stand out:

First, military bases will be reduced to three.

Second, all commercial function will be turned over to Panama.

Third, all U.S. Government functions will be turned over to Panama.

There are you speaking of the treaty negotiations that, according to the press, reached those agreements?

Mr. DRUMMOND. I am speaking of that, but also the conceptual agreements that have been made, what public statements the United States and Panama have agreed to.

We are talking about three bases, and I do not have the document with me now. I had that the last time I came up, in which these were the essential agreements that were agreed to by the United States and Panama.

Mr. SNYDER. But these were some of the preliminary agreements in regard to it?

Mr. DRUMMOND. Yes.

Mr. SNYDER. Is there anything transpiring there now that indicates that they are in the process of turning over commercial functions to Panama, or government functions to Panama?

Mr. DRUMMOND. Well, I consider these facilities, these bases, and my understanding is there has been several inquiries made to Congress indicating different bases would be turned over.

Now, these are all justified under other reasons. I think Amador, I have some indication that they are getting ready to turn this base

over.

Mr. SNYDER. You have some indication. Can you nail it down a little bit?

We will ask the Governor about it.

Mr. DRUMMOND. Specifically, some of the functions that are sta

tioned there, like the 79th Army Band. It is my understanding, any way they spent $60,000 to refurbish the building.

They told me they would not have to be there, and their people have indicated they are getting ready to turn the base over; that is, the supervisors there.

I did not go into this deeply with respect to the military facilities, because I felt that the Congress had been given inquiries made, and that was the idea that was established, or I can find out the information.

Mr. SNYDER. I would appreciate it if you have any such information, and if the Governor would tell us.

Mr. DRUMMOND. The indication I have is the treaty hearings over the years, and then you have this, what is, in effect, cause and effect, and I only went through this thing 3 or 4 months ago, as far as the military establishments were concerned.

I would have to get back, if I could, and give you the specifics on it. Mr. SNYDER. Very good.

Thank you very much.

Mrs. SULLIVAN (presiding). Mr. Drummond, I think your information is quite potent. It is information that we in this committee should have, but cannot follow with any action.

Have you any objection to this being turned over to our own intelligence establishment here in Washington?

Mr. DRUMMOND. No; in fact, Madam Chairman, I would like to have it turned over. I would like to see a direction being taken, because what I am giving here is from the guy on the street.

I do not have all the information. I could not get it, but I think if it was a man with authority that could make the investigation, because I work, too, not only on this, but I work, I hope I will still be working, any way, 8 hours a day.

I spend my time in union business, as well as time here on this problem.

Mrs. SULLIVAN. Well, I think it is good information that could provide good leads to be followed through by those in our own Government who are charged with this kind of problem. We cannot, and do not, have the facilities or the ability to follow through, but we certainly appreciate your taking your time to come up here and give the information to us, because I think it is potent. If they can come up with some of the background and follow through the leads, maybe it will be for the good of all of us.

Mr. DRUMMOND. Well, I hope so, Madam Chairman.

Mr. SULLIVAN. I appreciate your coming.

It has been a long day.

Mr. SNYDER. I think it would be good to have unanimous consent that if the Governor wishes to have filed an additional statement in response to what Mr. Drummond has said and alleged, he should be able to do so.

Mrs. SULLIVAN. If you have any additional comments, fine. I think we also asked Secretary Veysey, and his will be permitted.

I hope that we have some good material on which to act. The news media stopped me outside. I did not reveal anything I should not reveal. I said that the negotiations are still going on.

I said it is our understanding there will be no decision before the elections or before the end of the year, despite the fact that some of us in the Committee are completely opposed to the negotiations.

The negotiations are still going on, and yet, the treaty can never be in effect until it is ratified by the Congress. That means both Houses, it must be ratified by the Senate and implemented by the House.

I am sure this will all be on the air. It is not revealing anything I cannot tell, but I do think the people should know that these things are going on, and I hope that there will be documentation before all of us should there be a development of events.

I thank all of you for coming, and the subcommittee stands adjourned until the call of the Chair.

[The following material was submitted for inclusion in the record:]

PREPARED STATEMENT OF STEWART D. McELYEA, DIRECTOR FIELD OPERATIONS DIVISION, UNITED STATES GENERAL ACCOUNTING OFFICE, WASHINGTON, D.C.

Mr. Chairman and Members of the Subcommittee: We appreciate the opportunity to advise you of the work which we have in process covering the matters that are the subject of these hearings. As discussed with a member of the Subcommittee's staff, the following letters will be submitted to you in time for inclusion in the record of these hearings.

1. A reply to a joint request, dated February 2, 1976, from the Honorable Leonor Sullivan and Ralph Metcalfe for our answers to various questions relating to the recent accounting principle changes made by the Canal organization. 2. A letter commenting on H.R. 12641, a bill to allow the Company interest credit on its cash deposited with the U.S. Treasury and to provide for the temporary deferment of the net direct investment of the U.S. Government in the Company.

For your information, we also have the following reports in process on the Canal organization. The reports should be issued within the next 4 to 6 weeks. 1. Report to the Congress on our examination of the Canal organization's financial statements for fiscal years 1974 and 1975.

2. Report to the Secretary of the Army on our recent review of hospital and electrical rates charged by the Canal organization.

In addition to our opinion on the Canal organization's financial statements, our financial examination report includes comments on the Company's position that it should be allowed a benefit on its cash deposited with the U.S. Treasury and presents several alternative ways of obtaining this benefit, including the one which is covered in H.R. 12641. In our review of the hospital and electrical rates, we have tentatively concluded that changes should be made in the hospital rate area that would (1) increase the Canal Zone Government's recoveries of hospital cost from other U.S. Government agencies and individual's health insurance companies, and (2) decrease the expense incurred by the U.S. military and other U.S. Government agencies for hospital cost relating to civilian employees and their dependents. We have also tentatively concluded that changes should be made in the electrical rate area which will probably decrease costs incurred by other U.S. Government agencies but increase the Canal organization's electrical cost. Copies of these reports will be furnished to the House Panama Canal Subcommittee upon issuance.

PREPARED STATEMENT OF EARL W. CLARK, TALMAGE E. SIMPKINS,
CO-DIRECTORS, LABOR-MANAGEMENT MARITIME COMMITTEE

The LMMC, composed of major steamship lines and maritime unions, appreciates the opportunity to present the following views on the financing of the Panama Canal and H.R. 12641.

There is no question but that the Panama Canal Zone is in serious financial difficulty if the losses for the past few years, plus the projections for this year are factual. The Canal, in our opinion, will be in more serious problems if the

tolls that were increased in 1973 and 1976 are increased again by the projected 20 to 25% later this year.

LMMC does not relate its comments to any current treaty negotiations surrounding the Canal Zone. Rather, our comments and suggestions on the Panama Canal Zone are directed principally to the economics of the transportation situation.

The basic problem is simple. The revenue from the tolls is not sufficient to cover the outlays that the Panama Canal Company has to make..

This problem can be met on a temporary basis by H.R. 12641. This legislation provides for the temporary deferment of payment to the Treasury on the net direct investment of the Government in the Panama Canal Company. As we understand it, this legislation would do three things:

1. The annual interest paid by the Panama Canal Company to the U.S. Treasury on the Government's net direct investment in the Canal would be reduced by an offsetting interest earning on the cash that the Company has on deposit with the Treasury;

2. Interest payments on the Government's investment would be paid to the extent earned; and,

3. The interest charges not earned would be added to the net direct investment of the Government in the Panama Canal Company.

This differs from the current situation in that the Panama Canal Company does not earn interest on the cash on deposit with the Treasury and when the income from tolls does not provide sufficient funds to make the interest payment on the investment, tolls are to be increased.

This legislation is defined as temporary and we urge its enactment. The alternatives appear simple. Increase revenue or reduce expenditures. The only way to increase revenue is to raise tolls. The level to which the tolls can be raised is questionable. How can higher tolls really help when they can be avoided by many carriers by using, not only the competing Suez Canal, but also the growing practice of moving international freight overland in landbridge and minibridge services?

There are several reasons why traffic through the Canal has declined-the general decline in international shipping and economic conditions as well as the opening of the Suez Canal. Additionally, technological changes allow one ship, because of size and speed, to replace a number of C-2 equivalents, thereby reducing the total number of liner vessels engaged in world commerce.

The Company, already hit by its first-ever deficit in fiscal 1973 was, under the self-sustaining requirement, left with little option but to raise tolls. This was done in 1974. However, conditions have changed little since, and tolls have again been boosted by revisions in the ship admeasurement system. Canal Company officials have now left little doubt that another general increase of 20 to 25% will be forthcoming within the year.

The carriers, to our knowledge, have never objected to paying tolls to help support the Canal. However, it would make little sense to continue to use the Canal when an alternate route is available at lesser cost, whether it be the Suez Canal or a landbridge movement across the United States or Russia. We suggest that the tolls are now at the level where alternate routes are being employed. A further increase would only accelerate this movement away from the Canal and thereby further reduce the revenue collected.

The other and more logical alternative is to reduce the expenditures of the Panama Canal Company. Certain costs of running the Panama Canal Company should be transferred from the users of the Waterway.

Some $9 million of the Panama Canal Government's $23.5 million budget, paid by the Canal Company, goes to cover such non-transit related expenses as operating customs, immigration, postal, police and fire protection services, as well as a judicial system and civil defense. We don't expect our fire departments and police departments to pay their own costs. They perform essential services for the public and are supported in that vein.

We, therefore, suggest that these expenses be paid out of the General Treasury.

PREPARED STATEMENT OF EUGENE A. JOHNSON, PRESIDENT OF THE CONGRESS OF LATIN AMERICAN CIVIC COUNCILS, CANAL ZONE

1. Mr. Chairman-members of the Subcommittee on the Panama Canal. As spokesman for the four Panamanian Civic Councils in the Canal Zone-Paraiso,

Pedro Miguel, Santa Cruz and Rainbow City-it is my privilege once more to submit for the record the comments and concerns of the citizens of Panama, Republic of Panama; residents of the Canal Zone and proven dedicated workers of the Panama Canal Company/Canal Zone Government.

2. These councils, composed of elected representatives of the various townsites mentioned, function as a sounding board and very often, advise the Governor and other officials regarding the various aspects of our community activities. 3. We represent a variety of people from the Company/Government workforce, some of whom are; teachers, police officers, firefighters, locomotive operators, and largely form the crux of those who may be considered as the mainstay of the Company/Government-helpers and/or assistants-positions for which we have been relegated too long. We aspire for managerial positions also.

4. Our Civic Councils have traditionally been concerned with those issues that relate to the standards of community life, i.e. housing, schools, health care, etc., however we were forced to react to the sentiments and attitudes recently displayed by key employees of the Canal's waterway.

5. The developments referred to were primarily those coming out of the announcements of the Canal Zone Civilian Personnel Policy Coordinating Board, i.e. wage freeze and cuts, reduction of certain fringe benefits, and what some sectors called, "deteriorating factors of their community housing and school life".

6. That the Panamanian employees, whether a resident of the Canal Zone or not, were deriled, push aside, relegated to outlying residential districts and/or worked under substandard conditions, naming a few discriminatory conditions, was of no concern whatsoever to the U.S. citizen here in the Canal Zone.

7. However, the proposed austerity measures and the change in the housing and school policy sparked many into reacting in the manner displayed recently, i.e. wildcat strikes called sick-outs.

8. The wage freeze and cuts, although only proposals, and the reduction of the security protected positions, were really disguised targets. The real issues to which objections were strongly and vigorously voiced were and still are the amalgamation of the school systems and the total and complete integration of the Canal Zone Communities.

9. The austerity program announced by the Canal Zone Government is nothing new to the Isthmian communities. For the past several years, we have experienced the loss of many community facilities and services, i.e. reduced daily theater and retail stores operations, the closing of restaurants and/or replacing of those services with coin operated food machines, a continuing monopoly of the only public bus transportation service to the various communities we represent.

10. That the Panamanian workforce is very much concerned about the decrease in ship transits, that these employees feel that they are unfarily asked to share in the Company's cutbacks and deficits, and that they know that there are other measures accessible to the Company that will be money-saving projects during this "slump" in the Canal's deficit, are all unchallenged facts.

11. No other groups of the Canal's workforce has suffered more than those citizens of the Republic of Panama. Disguised equal work, but never equal pay, separate job site facilities, i.e. bathrooms, snacks bars, eateries, etc. Yet, there are others who dare consider themselves unfortunate. Low morale has always been the lot of the members of the LatAm Civic Councils. It is only recently that others can truly speak of that same morale condition. No one really cared; it didn't bother them. . . However, the squeeze is on now! Others are feeling that lifelong pinch, felt so long by the LatAm residents and non-resident workers; and immediately they scream of low morality within the Company.

12. The recent "sick-out" should be used by the Canal Government to measure that trust and loyalty of those acclaimed key employees. One essential employee stated in the local press that even if there were 500 ships tied up, he wouldn't give up or come back to work until all demands were met. The Panamanians who might have been involved, were victims of circumstances beyond their control. There are those in some quarters who say that the two (2) Panamanians employed as pilots didn't show for work. Inasmuch as they were placed on an away with leave pay status, had they shown for work, they would have been deriled, ridiculed, and classified as "scabs". Federal employees are known to sign a no-strike statement. Yet, as is known, the employees who didn't show for work, called in "sick". Indeed, if nothing else, this was a disguised strike