* The United States and Panama both have a strong common interest in retaining a residual U.S. military presence in Panama after 1999.
* Talks have centered upon the creation of a new Multinational Counter-Narcotics Center (MCC) which both sides support.
* The key issue is the extent to which this residual presence will not resemble a more traditional base structure, with Panama pressing for a much less traditional arrangement.
* Without creativity on both sides, the talks could break down, forcing the U.S. military to leave Panama after 1999. This is an outcome neither side desires.
* A security assistance package for Panama, possibly focused on the common counter-narcotics mission, might prove important to success of the talks.
When the last U.S. military element leaves Panama at noon on December 31, 1999, that departure may create a vacuum which could threaten the efficient operation of the canal and the regional security in the strategic median of the Western Hemisphere. Although the Neutrality Treaty, which continues in perpetuity, guarantees access to all vessels desiring transit of the canal on an equitable basis, the enforcement provisions are vague. The greatest fear is of the Colombianization of Panama.
The U.S. departure would end almost a century of military presence on the isthmus, during which normal relations between the two countries have been at times harmonious; and at other times highly contentious-leading to the JUST CAUSE intervention in 1989. However, by 2000, the United States will "return" over $3.4 billion in lands and properties, which Panama has admitted may be beyond their capability to absorb and manage in an efficient manner. In September 1995, Presidents William Clinton and Ernesto Perez Balladares agreed to explore various options for a continued U.S. presence.
Opinion is split in Panama and the United States, and the issue is being hotly debated. Two factors complicate the issue: On the one hand, intense Panamanian nationalism clamors for "full" implementation of the Canal Treaty. On the other hand, the United States has decided not to pay compensation for residual basing because of base closures in the continental United States, and because of the negative precedents for U.S. bases elsewhere. The impasse over these two contentious positions delayed the onset of exploratory talks for over 14 months. Recently, a corner may have been turned and there is briefly an historic opportunity to move beyond the clog and seriously address, in formal talks, what U.S. and Panamanian policymakers agree is in the best interests of both nations.
The Need for Continued U.S. Presence
From a narrow military perspective, the Panama Canal remains useful for the rapid transit of military supplies from one theater to another, particularly in a "two major regional contingency" scenario. That use, however, is guaranteed by the Neutrality Treaty, and the canal's overall military importance has been degraded since the end of the Cold War.
Nonetheless, the efficient and routine operation of the canal itself remains of critical commercial importance to the United States (over 10% of all U.S. trade passes through the canal; two thirds of all transits either originate or terminate in the United States). It is also vital to commercial enterprise in Peru, Chile and Ecuador. The fact that the People's Republic of China (PRC) has expressed support for the recent leasing of container facilities on both ends of the canal by the Hong Kong based Hutchinson Shipping Lines is an indication that China sees a continued strategic and commercial importance for the canal into the foreseeable future. Panamanian officials expressed concern about growing Chinese presence throughout the region.
In addition, the geostrategic location of Panama makes it an ideal site from which to manifest a clear U. …