Sea Level Canal Studies 1982-1993

The Republic of Panama and the United States formally aqreed in September 1982 to establish a Preparatory Committee for the study of alternatives to the Panama Canal, includinq a sea-level canal, and to invite the government of Japan to participate as a full memher -- an invitation which Japan accepted. The Committee developed terms of reference for a trilateral Study Commission, which were adopted by the three qovernments in September 1985. These terms included:

--the study objectives, i.e., identification of potential transportation alternatives to the existinq canal in Panama and detailed study and conceptual planning for the best alternative;

--a description of the transportation alternatives to be analyzed in the study;

--the oryanizational structure and operating quidelines for the study;

--a proposed study budget of $20 million, with costs to be equally shared by three qovernments; and

--an expected commencement of the study in January 1986 with a duration of approximately 5 years.

Throuqh an exchanqe of diplomatic notes, dated 26 September 1985, the United States and Panama aqreed that upon its completion, the study of alternatives would fulfill the parties' mutual treaty obligation to study the feasibility of a sea-level canal in Panama.

Article XII paragraph 1 of the Panama Canal Treaty between Panama and the United States, signed in Washinqton on 07 September 1977, stated that, ' . ..during the duration of this Treaty [which expires on December 31, 19991, both Parties commit themselves to study jointly the feasibility of a sea-level canal in the Republic of Panama...." The Panama Canal Act of 1979 (Public Law 96-70, Sept. 27, 1979) implemented this treaty provision in section 1109(a) of the act, which states that "The President shall appoint the representatives of the United States to any joint committee or body with the Republic of Panama to study the possibility of a sea level canal in the Republic of Panama pursuant to Article XII of the Panama Canal Treaty of 1977."

Neither the treaty nor the act is definitive regarding which federal aqency should coordinate and direct U.S. planninq efforts for the study, how the study should be conducted and financed, or when during the treaty period it was to be conducted. By Executive Order 12215, dated May 27, 1980, the President deleqated certain functions vested in him by the Panama Canal Act of 1979 to the heads of federal aqencies. This delegation of Panama Canal functions did not address the sea-level canal feasibility study.

Since no specific legislative or executive authority was delegated Lo a particular agency, the Department of State assumed the lead in coordinatinq U.S. planning efforts for this study by virtue of its customary responsibility for treaty implementation, international neqotiation, and conduct of U.S. foreiqn relations. During the late 1970's, Japan and Panama independently discussed the possibility of a sea-level canal in Panama and sought a U.S. commitment to immediately undertake a joint feasibility study. State's lead role concerning this U.S. treaty commitment evolved out of preliminary discussions with the Panamanians and Japanese in 1980. This role was confirmed in April 1981 when, at the request of the President's National Security Adviser Richard Allen, the State Department agreed to chair a senior interagency group tasked with formulating administration policy to implement the Panama Canal treaty. Defense and Commission officials did not object to State taking control of the study preparations.

The study, which examined transportation alternatives in addition to the feasibility of a sea-level canal in Panama, discharged the 1977 U.S. -Panama treaty obligation to conduct a sea-level canal feasibility study. While the study was of broader scope than that necessary to discharqe the treaty obligation, it was in accord with administration policy established in 1981 on US-Panama treaty implementation.

By agreement of the three participating governments, all of the considered traffic improvements were within the geographical area of the Republic of Panama. However, these improvements are not restricted to any one mode of transportation. The categories of improvements to be considered include, among others: expanding the dimensions of the Canal; supplementing the Canal with pipeline, rail and highway systems; overland transportation of ships, and construction of a sea-level canal. Each alternative took into consideration the cost and competition from non-Panamanian routes such as the U.S. landbridge, as well as the advantages/disadvantages of one over the other.

While it was clear that the Canal's capacity must be improved to meet the growing demands of world trade, the question remained as to what is the most feasible improvement to be made. To help make this decision, new trade projections were necessary along with fleet projections. Moreover, the determination of the nature and type of financing of improvements is critical. Recent studies had demonstrated that present Canal traffic is toll sensitive. Consequently, a simple raising of the tolls to finance a project was not the answer. In addition, environmental issues were as mammoth as some of the alternatives. To mention just a few, a sea-level canal had the probability of introducing new species to the Caribbean; while larger locks would increase the water demand with the possibility, according to some estimates, of having to pump sea water into the Canal to meet this demand.

The Tripartite Commission, formed by Japan, Panama and the United States, began to study alternatives to the existing Panama Canal in 1986. Options considered were building another sea-level canal, enlarging the existing canal with more locks, improving the canal to complement upgraded rail and road facilities, or continuing with existing facilities. When the Commission completed its work in September 1993, it essentially concluded that the present canal, with a widened Gaillard Cut, could handle shipping requirements at least to the year 2020.