79–006

106TH CONGRESS REPT. 106–803 " ! HOUSE OF REPRESENTATIVES 2d Session Part 1

UNITED STATES-PANAMA PARTNERSHIP ACT OF 2000

JULY 27, 2000.—Ordered to be printed

Mr. GILMAN, from the Committee on International Relations,

submitted the following

REPORT

together with

MINORITY VIEWS

[To accompany H. Res. 3673]

[Including cost estimate of the Congressional Budget Office]

The Committee on International Relations, to whom was referred

the bill (H.R. 3673) to provide certain benefits to Panama if Panama agrees to permit the United States to maintain a presence

there sufficient to carry out counternarcotics and related missions,

having considered the same, report favorably thereon without

amendment and recommend that the bill do pass.

BACKGROUND AND PURPOSE

In accordance with the Panama Canal Treaties of 1977, the

United States terminated its military presence in Panama at the

end of 1999, and Panama assumed full control of the Panama

Canal and all former U.S. military installations.

The loss of U.S. access to facilities in Panama, especially Howard

Air Force Base, has had a devastating effect on the ability of the

United States to protect its interests in Latin America and the Caribbean. Counternarcotics operations have been particularly hard

hit. With regard to aerial interdiction operations, the Commanderin-Chief of the United States Southern Command, General Charles

Wilhelm, stated in a letter dated June 8, 2000, that until the facilities at Howard Air Force Base are replaced, ‘‘we estimate that our

capability will continue to be approximately a third of what it was

in Panama.’’

The following chart, prepared by the General Accounting Office

for a December, 1999 report to Congress illustrates graphically the

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effect on counternarcotics operations of the closure of Howard Air

Force Base in mid-1999:

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A 1977 protocol to the Treaties provides that the United States

and Panama may agree to a U.S. presence in Panama after 1999.

For three years, U.S. and Panamanian negotiators sought to reach

just such an agreement. On September 24, 1998, however, it was

announced that these negotiations had failed and that the U.S.

military would withdraw from Panama as scheduled.

This was a regrettable turn of events for both of our countries.

The United States and Panama both benefitted in many ways from

the U.S. presence in Panama. For the United States, that presence

provided a forward platform from which to combat narcotrafficking

and interdict the flow of drugs, which threatens all countries in

this hemisphere. These benefits to the United States cannot be duplicated at the so-called ‘‘forward operating locations’’ that the Administration has sought with limited success to set up in several

countries in Latin America and the Caribbean.

For Panama, the U.S. presence added an estimated $300 million

per year to the local economy, fostered economic growth by contributing to a stable investment climate, and helped deter

narcoterrorism from spilling over into Panama.

In retrospect, the United States should have responded more favorably to Panama’s proposal in 1995 to negotiate an extension of

our traditional presence in exchange for a package of benefits to be

mutually agreed upon. In the wake of the Clinton Administration’s

decision to reject that proposal, the effort to establish a Multinational Counternarcotics Center failed to gain broad support

across Panama’s political spectrum.

H.R. 3673 returns to, and builds upon, the concept proposed by

Panama in 1995 of permitting a U.S. presence in Panama beyond

1999 in exchange for a package of benefits. The legislation also accepts the idea first proposed by Panama of permitting counternarcotics operations from Panama to take place under multinational auspices.

The purpose of H.R. 3673 is to give the President authorities that

he can use to seek an agreement with Panama to permit the

United States to maintain a presence there sufficient to carry out

counternarcotics and related missions.

H.R. 3673 offers Panama the opportunity to join Canada and

Mexico in forging a new, more mature, mutually beneficial relationship with the United States. In exchange, the legislation asks Panama to remain our partner in the war on drugs by agreeing to host

a U.S. presence, alone or in conjunction with other friendly countries, sufficient to carry out counternarcotics and related missions.

H.R. 3673 is merely a grant of authority to the President. It

seeks to provide him with tools that he can use to negotiate an

agreement with Panama regarding a matter of vital concern to

both countries. The President will be free to use or not use the

tools provided by H.R. 3673. If the President chooses to use them,

Panama will be free to accept or reject any proposal the President

makes.

The Committee hopes that Panama will accept the invitation extended by H.R. 3673 to reinvigorate the special relationship between our two peoples.

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COMMITTEE ACTION

H.R. 3673 was introduced on February 16, 2000, by Mr. Gilman.

It was referred to the Committee on International Relations, and

in addition to the Committee on Ways and Means, for a period to

be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the

Committee concerned.

On July 28, 1999, the Committee held a hearing on ‘‘Post-1999

U.S. Security and Counter-Drug Interests in Panama.’’ Testimony

was received from Ambassador Thomas E. McNamara, formerly the

Clinton Administration’s chief negotiator with Panama in the negotiations aimed at reaching an agreement regarding a post-1999

U.S. presence in Panama, and General George Joulwan, former

Commander-in-Chief of the United States Southern Command in

Panama.

In addition, the Committee has held numerous staff briefings

with Administration officials and others regarding the negotiations

with Panama and efforts to replace Howard Air Force Base and

other U.S. facilities in Panama. Several members of the Committee

have traveled to Panama to explore these issues first-hand, as have

members of the Committee staff.

MARKUP OF THE BILL

The Committee on International Relations marked up H.R. 3673

on June 29, 2000. The Full Committee considered the bill and

agreed by voice vote to a motion to favorably report the bill to the

House of Representatives, a quorum being present. No amendments were offered during the Committee markup.

RECORD VOTES ON AMENDMENTS AND MOTION TO REPORT

Clause (3)(b) of rule XIII of the Rules of the House of Representatives requires that the results of each record vote on an amendment or motion to report, together with the names of those voting

for or against, be printed in the committee report. No record votes

were taken during the consideration of H.R. 3673.

OTHER MATTERS

COMMITTEE OVERSIGHT FINDINGS

In compliance with clause 3(c)(1) of rule XIII of the Rules of the

House of Representatives, the Committee reports the findings and

recommendations of the Committee, based on oversight activities

under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report.

COMMITTEE ON GOVERNMENT REFORM FINDINGS

Clause 3(c)(4) of rule XIII of the Rules of the House of Representatives requires each committee report to contain a summary of the

oversight findings and recommendations made by the Government

Reform Committee pursuant to clause (4)(c)(2) of rule X of those

Rules. The Committee on International Relations has received no

such findings or recommendations from the Committee on Government Reform.

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ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the

Federal Advisory Committee Act are created by this legislation.

APPLICABILITY TO THE LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the

terms and conditions of employment or access to public services or

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act.

CONSTITUTIONAL AUTHORITY STATEMENT

In compliance with clause 3(d)(1) of rule XIII of the Rules of the

House of Representatives, the Committee cites the following specific powers granted to the Congress in the Constitution as authority for enactment of H.R. 3673 as reported by the Committee: Article I, section 8, clause 1 (relating to providing for the common defense and general welfare of the United States); Article I, section

8, clause 3 (relating to the regulation of commerce with foreign nations); and Article I, section 8, clause 18 (relating to making all

laws necessary and proper for carrying into execution powers vested by the Constitution in the Government of the United States or

in any Department or Officer thereof).

PREEMPTION CLARIFICATION

Section 423 of the Congressional Budget Act of 1974 requires the

report of any committee on a bill or joint resolution to include a

committee statement on the extent to which the bill or joint resolution is intended to preempt state or local law. The Committee

states that H.R. 3673 is not intended to preempt any state or local

law.

NEW BUDGET AUTHORITY AND TAX EXPENDITURES, CONGRESSIONAL

BUDGET OFFICE COST ESTIMATE, AND FEDERAL MANDATES STATE- MENTS

Clause 3(c)(2) of rule XIII of the Rules of the House of Representatives requires each committee report that accompanies a measure

providing new budget authority, new spending authority, or new

credit authority or changing revenues or tax expenditures to contain a cost estimate, as required by section 308(a)(1) of the Congressional Budget Act of 1974, as amended, and, when practicable

with respect to estimates of new budget authority, a comparison of

the estimated funding level for the relevant program (or programs)

to the appropriate levels under current law.

Clause 3(d) of rule XIII of the Rules of the House of Representatives requires committees to include their own cost estimates in

certain committee reports, which include, when practicable, a comparison of the total estimated funding level for the relevant program (or programs) with the appropriate levels under current law.

Clause 3(c)(3) of rule XIII of the Rules of the House of Representatives requires the report of any committee on a measure which

has been approved by the Committee to include a cost estimate

prepared by the Director of the Congressional Budget Office, pursuant to section 403 of the Congressional Budget Act of 1974, if the

cost estimate is timely submitted.

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Section 423 of the Congressional Budget Act requires the report

of any committee on a bill or joint resolution that includes any Federal mandate to include specific information about such mandates.

The Committee states that H.R. 3673 does not include any Federal

mandate.

The Committee adopts the cost estimate of the Congressional

Budget Office as its own submission of any new required information with respect to H.R. 3673 on new budget authority, new

spending authority, new credit authority, or an increase or decrease in the national debt. It also adopts the estimate of Federal

mandates prepared by the Director of the Congressional Budget Office pursuant to section 423 of the Unfunded Mandates Reform Act.

The estimate and report which has been received is set out below.

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, July 13, 2000.

Hon. BENJAMIN A. GILMAN, Chairman, Committee on International Relations,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3673, the United StatesPanama Partnership Act of 2000.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contacts are Joseph C. Whitehill

(for federal spending), and Hester Grippando (for federal receipts).

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen, Director).

Enclosure.

H.R. 3673—United States-Panama Partnership Act of 2000

Summary: H.R. 3673 would authorize certain financial benefits

for Panama upon the certification by the President that the governments of the United States and Panama have reached an agreement that would permit the United States to maintain a presence

at certain facilities in Panama for a period of at least 15 years. The

benefits would include preferential tariff treatment for certain Panamanian imports, which would reduce governmental receipts by $1

million to $2 million a year, up to $2 million in scholarships for

Panamanian students, and two small grants. No negotiations for

U.S. access to Panamanian facilities are currently underway. CBO

does not expect an agreement in the next five years, and we therefore estimate that the bill would have no cost during that period.

CBO has no basis for estimating when or if an agreement might

occur after then. Because the bill could affect governmental receipts, the bill would be subject to pay-as-you-go procedures.

H.R. 3673 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA)

and would not affect the budgets of state, local, or tribal governments.

Estimated cost to the Federal Government: According to information from the State Department, no negotiations between Panama

and the United States are underway and none are likely in the

near future. Therefore, CBO estimates that the bill would have no

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budgetary impact over the 2000–2005 period. If the bill were enacted and if Panama would agree to a U.S. presence, then the bill

could affect both receipts and spending subject to appropriation.

Revenues

H.R. 3673 would provide trade preferences for certain imports

from Panama, including textiles, apparel, luggage and handbags,

certain leather goods, footwear, tuna, petroleum, watches, and

watch parts. Most of the provisions in the bill affecting customs receipts were enacted in the Trade and Development act of 2000

(Public Law 106–200).

One major exception is a provision that would offer ‘‘in-preference-level tariff treatment’’ to certain textile and apparel articles

that do not originate in Panama. The tariff treatment accorded to

those goods would be equivalent to the tariff treatment of similar

goods from Mexico. Imports of textile and apparel goods under this

provision would be limited to approximately 11 million square

meter equivalents in a calendar year. Based on recent data on import collections, CBO estimates that if this provision were to take

effect, governmental receipts would be reduced by approximately

$1 million a year through 2008, while the provisions of Public Law

106–200 are in effect. After 2008, when Public Law 106–200 expires, the potential cost of the bill would rise to $2 million a year.

Spending subject to appropriation

For each year an agreement is in force, H.R. 3673 would authorize up to $2 million for scholarships for Panamanian students.

Thus, spending for scholarships would increase by that amount, assuming the appropriation of the authorized amounts.

The bill also would direct the Trade and Development Agency

(TDA) to consider making grants for the planning of a new bridge

across the Panama Canal and for a sewage-treatment plant in Panama City. TDA has already extended a grant to study the feasibility of a second canal bridge and is considering extending grants

for water and sewage projects in Panama using available resources.

CBO therefore estimates that H.R. 3673 would not affect spending

by TDA.

The bill would require several reports, including one on the extent to which Panama complies with U.S. trade laws. CBO estimates that the costs of preparing those reports would be insignificant.

Pay-as-you-go considerations: The Balanced Budget and Emergency Deficit Control Act sets up pay-as-you-go procedures for legislation affecting direct spending or receipts. While H.R. 3673 could

affect receipts, CBO does not anticipate any loss of receipts over

the 2000–2005 period.

Intergovernmental and private-sector impact: H.R. 3673 contains

no intergovernmental or private-sector mandates as defined in

UMRA and would not affect the budgets of state, local, or tribal

governments.

Estimate prepared by: Federal Costs: Joseph C. Whitehill. Federal Revenues: Hester Grippando. Impact on State, Local, and Tribal Governments: Leo Lex. Impact on the Private Sector: Lauren

Marks.

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Estimate approved by: Robert A. Sunshine, Assistant Director for

Budget Analysis. G. Thomas Woodward, Assistant Director for Tax

Analysis.

SECTION-BY-SECTION ANALYSIS

Section 1. Short title

Provides that the Act may be cited as the ‘‘United States-Panama

Partnership Act of 2000’’.

Section 2. Findings

Contains congressional findings regarding the history and purpose of the U.S. presence in Panama, negotiations to extend that

presence beyond 1999, and the strong shared interest that the

United States and Panama continue to have in maintaining a U.S.

presence in Panama.

Section 3. Certification and report regarding agreement to maintain

a United States presence in Panama

Authorizes the President to submit a certification and report to

the Committee on International Relations of the House of Representatives and the Committee on Foreign Relations of the Senate

at any time after the date of enactment. The certification would affirm that the United States and the Government of Panama have

reached an agreement permitting the United States, for a period of

not less than 15 years, to maintain a presence, alone or in conjunction with other friendly countries, sufficient to carry out necessary

counternarcotics, search and rescue, logistical, training, and related

missions at Howard Air Force Base, Fort Kobbe, Rodman Naval

Station, and Fort Sherman, under terms and conditions substantially similar to those applied to the United States presence at

those facilities during the period beginning on October 1, 1979 and

ending on December 31, 1999. The report would contain, among

other matters, the text of the agreement and a detailed description

of the terms and conditions which will apply to the U.S. presence

permitted under the agreement. To the degree necessary, the report may be submitted in classified form.

Section 4. Benefits

Subsection (a) provides that if the President submits the certification and report under section 3, then various benefits described

in subsections (b), (c), (d), (e), (f), (g), and (h) will be extended to

Panama.

Subsection (b) directs the Director of the Trade and Development

Agency to consider a grant or grants to assist the design, financial

planning, training, and other preparatory steps for the construction

of a new bridge across the Panama Canal, and requires the Director of the Trade and Development Agency to submit a report to the

Committee on International Relations of the House of Representatives and the Committee on Foreign Relations of the Senate, not

later than one year after the date of submission of the certification

and report under section 3, regarding the steps taken pursuant to

this subsection.

Subsection (c) directs the Director of the Trade and Development

Agency to consider a grant or grants to assist the design, financial

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planning, training, and other preparatory steps for the construction

of a new sewage treatment plant for Panama City, and requires the

Director of the Trade and Development Agency to submit a report

to the Committee on International Relations of the House of Representatives and the Committee on Foreign Relations of the Senate, not later than one year after the date of submission of the certification and report under section 3, regarding the steps taken

pursuant to this subsection.

Subsection (d) directs the Administrator of the Agency for International Development to ensure that up to $2 million of the funds

made available each year to the Cooperative Association of States

for Scholarships program are made available for deserving students

from Panama to study in the United States, and requires the Administrator of the Agency for International Development to submit

a report to the Committee on International Relations of the House

of Representatives and the Committee on Foreign Relations of the

Senate, not later than one year after the date of submission of the

certification and report under section 3, regarding the steps taken

pursuant to this subsection.

Subsections (e), (f), (g), and (h) contain provisions within the jurisdiction of the Committee on Ways and Means relating to a trade

benefit that shall be available to Panama if the President submits

the certification and report under section 3.

Section 5. Applicability of benefits

Contains a provision within the jurisdiction of the Committee on

Ways and Means relating to the availability of the trade benefit

provided under section 4.

Section 6. Conforming amendment

Contains a conforming amendment to the Caribbean Basin Economic Recovery Act within the jurisdiction of the Committee on

Ways and Means.

CHANGES IN EXITING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (new matter is printed in italic

and existing law in which no change is proposed is shown in

roman):

SECTION 213 OF THE CARIBBEAN BASIN ECONOMIC

RECOVERY ACT

SEC. 213. ELIGIBLE ARTICLES.

(a)(1) Unless otherwise excluded from eligibility by this title, and

subject to section 423 of the Tax Reform Act of 1986, and except

as provided in section 4 of the United States-Panama Partnership

Act of 2000, and except as provided in subsection (b)(2) and (3), the

duty-free treatment provided under this title shall apply to any article which is the growth, product, or manufacture of a beneficiary

country if—

(A) * * *

* * * * * * *

(11)

MINORITY VIEWS

We oppose H.R. 3673, the United States-Panama Partnership

Act, as ordered reported by the Committee on International Relations. We share concern about the situation in Panama and would

support a presence there under the right circumstances. This bill,

on the other hand, moves the situation in the opposite direction.

The bill amounts to no more than a statement by the authors

that they are tough on drugs and want to regain U.S. influence in

Panama. The bill will do little to practically affect either U.S.

counter-narcotics objectives or help create an atmosphere under

which Panamanians would consider a U.S. presence. It is poorly

timed, threatens to inhibit rather than assist in achieving the goal

of a U.S. presence in Panama, sets a dangerous precedent on trading favors for basing rights, includes significant hidden costs, and

is unnecessary given progress on other U.S. sites in the region. The

Panamanians have said clearly that they are not interested in the

kind of presence this bill envisions. If it were to become law, this

legislation would hurt bilateral relations with Panama and set

back the objectives it intends to advance.

H.R. 3673 IS POORLY TIMED

In December 1997, United States and Panamanian negotiators

reached tentative agreement on a formula that would have allowed

a continued US presence in Panama after the treaty-imposed December 31, 1999 deadline. That agreement was comprehensive and

would have allowed a U.S. presence on counter-narcotics and a host

of other issues that had been determined to be critical to U.S. national security. It was, in short, an arrangement that many of us

were ready to support.

Prior to initialing this agreement, however, the Panamanian negotiators walked away from the deal. It was their assessment that

the political climate in Panama was not conducive to finalizing an

arrangement allowing a U.S. presence to remain. An influential

group of political elites opposed the agreement based on nationalist

concerns, and the conditions that they were set to impose on a continued U.S. presence called for too many compromises and raised

security concerns for U.S. personnel. A presence in that climate

and under those conditions was not in the United States national

interest.

That climate has not significantly changed, and this bill threatens to worsen it. The chief negotiator for the United States, testifying before the House International Relations Committee last

summer, made clear that pushing for a full U.S. presence was

counter-productive. He said, ‘‘Having failed to reach an agreement,

I strongly recommend that both countries adopt a cooling-off period

of several years.’’ He went on to say, ‘‘I would say that if the Panamanians came to us, then that would be one set of circumstances.

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But for us to take an initiative at this juncture I think would simply open wounds in Panama.’’

The Panamanians have not approached the U.S. about an expanded presence. On the contrary, they have continued to make it

clear that they are not interested in a U.S. military presence. In

order to convince the Panamanians that they need a U.S. presence,

the bill fashions several benefits for Panama. The chief benefit,

NAFTA parity, threatens to exacerbate a problem between our two

countries, a situation that is described further below. One of the

three other benefits—a Trade and Development Agency study of a

new sewage treatment plant in Panama City—is already being undertaken. The bill offers limited benefits and will delay the day

that Panamanians approach us about re-opening talks.

This bill also stands to threaten the little progress we have been

able to make with the Panamanians. The U.S. and Panama are negotiating a very minimal ‘‘Visiting Forces Agreement’’ and it is the

belief of our negotiators of this agreement that moving this bill for

a wider presence would in fact hamper those discussions. If we cannot get agreement on a minimal agreement now, we are sure to

dirty the waters for a wider agreement even after a cooling off period of several years. This bill may threaten our ability to ever

reach agreement with the Panamanians over a U.S. military presence there.

H.R. 3673 SETS A DANGEROUS PRECEDENT AND INCLUDES HIDDEN

COSTS

The bill, in offering a costly trade agreement for a deal on a U.S.

presence in Panama, sets a risky precedent for U.S. military presence in basing agreements across the globe. As we drive up the

price for Panama, other host countries for U.S. military personnel

elsewhere in the world look on. They too will hold out for a sweetheart deal in exchange for basing agreements.

But these are not the only costs that this bill carries with it.

Over the course of the last decade the U.S. military has been preparing the turnover of former U.S. assets in Panama. Construction

that would have otherwise been required was canceled and military

construction funds dedicated to other priorities. Re-establishing a

U.S. military presence in Panama will bring with it significant

military construction costs—by some estimates more than $100

million—costs that have not yet been budgeted for.

There are also significant diplomatic costs associated with this

bill. If it appears that we are not honoring our commitments to the

Canal Treaties of 1977, we will face increased skepticism and decreased cooperation throughout the rest of the Hemisphere.

H.R. 3673 IS NOT NEEDED

The military construction funds for alternative sites—in Aruba/

Curacao, Ecuador and El Salvador—have been budgeted for and

are ready to be put to use. The Administration has negotiated forward operating locations in Aruba, Ecuador and El Salvador and

with the recently passed military construction funds those sites

will be up and running—and giving us, at full implementation,

130% of the aerial counter-narcotics coverage we were able to generate out of Panama.

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These alternative sites have the added benefit of diversifying

U.S. counter-narcotics operations in the region. Rather than being

solely dependent on the political machinations of Panama, these

three forward operating locations give us greater coverage and

more cooperation from our friends in the region. These arrangements are already negotiated and ready to be implemented. Moving

forward on just Panama, on the other hand, further delays critical

action in the region and comes at a far greater political cost in the

region. The existing arrangements are the way to address our concerns for counter-narcotics operations in the region, not through

the well-intentioned but misguided H.R. 3673, a costly and unnecessary gamble that will risk present and future cooperation with

Panama and slow down our operations in the region.

CONCERNS ON TRADE

Understanding that the trade sections of this bill do not fall

within the jurisdiction of our Committee, we nonetheless want to

underscore our concerns on how this trade agreement affects two

major concerns as they relate to Panama. One, the bill contains no

safeguards for U.S. workers who will be affected by the agreement.

Two, the bill runs the risk of exacerbating a problem that the U.S.

has had with Panama since the passage of the Caribbean Basin

Initiative in the early 1980s. Panama, in comparison with its Central American neighbors, has a relatively small textile industry—

the main beneficiary of the trade benefits in H.R. 3673—and has,

in the past, re-exported to the United States textiles assembled in

China, labeling them as Panamanian products. Transshipment of

Chinese goods through Panama into the United States is consistently an issue of contention between Panama and the United

States. This bill not only does not address this problem but stands

to exacerbate it.

H.R. 3673 will not fulfill its intended goal. It complicates efforts

to cooperate with the Panamanians and will exacerbate problems

on trade. For these reasons we oppose the bill.

SAM GEJDENSON.

DONALD M. PAYNE.

ALCEE L. HASTINGS.

JOSEPH HOEFFEL.

STEVEN R. ROTHMAN.

JOSEPH CROWLEY.

BILL DELAHUNT.

JIM DAVIS.

ROBERT WEXLER.

GARY ACKERMAN.

EARL POMEROY.

ENI FALEOMAVAEGA.

TOM LANTOS.

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