Mr. ELLIOTT. A good many people spoke of it as a very difficult adjustment to make. Will you give us a bit of information about that?

Governor SEYBOLD. I think your impression, Mr. Chairman, was exactly right. I think the zone is at the moment undergoing a change which in my opinion can be likened only to the change when I got there when it was changed into a full corporation. The same economic effects will begin to impinge on the Canal Zone and frankly, sir, I don't think any of us can sit here today and foresee all the results of the effects of this treaty. Some of the terms of the treaty are quite simple and they don't affect us except as they may affect us a little in the fiscal manner. The ones we worry about of course are those portions of the treaty which affect the people. There is one which is most spoken of and the entire effects of which have not been determined yet and won't be for some time, although many folks read into the terms of the treaty things which are not there.

I refer in this case, of course, to that portion of the treaty which speaks of the fact that there must be an equal wage for equal work, no matter who does it. Actually, in words of one syllable that is what the treaty says in that regard, that two people doing the same work shall receive the same pay. It doesn't say anything about the base of the pay or anything of the sort or how much they shall be paid or anything except that if they are doing the same job, whether it is an American or a Panamanian, or anyone, those folks shall receive the same wage, with the 25-percent differential, more leave, and so on, to the American citizen.

Contrary to the thinking of many people, that doesn't say United States wage base. It just says equal pay for equal work. It is that plan that we are implementing now and trying to coordinate the development of that between the Armed Forces, who are the second largest employer, and the Panama Canal Company, who of course are the largest employer of the indigenous labor.

Up to this time the Armed Forces were not required by terms of the past treaty to follow along that line of policy, so they developed a different pattern of labor, pay rates, and so on. They also developed this different pattern due to their different requirements. So now we are in the process and have just about completed-in fact, I think we can say we have completed the unification of our programs, which will bring everyone to about the same viewpoint.

The other parts of the treaty are those which require of course the turning over of certain lands and improvements to Panama. That only requires Congress to appropriate some further funds so we can rebuild and replace those facilities on the Canal Zone instead of where they are in the Republic of Panama.

I think the committee saw the location of those which were unfortunately built in those years in the Republic, and now for many reasons we advocate that our people be withdrawn to live entirely on the Canal Zone.

Mr. ELLIOTT. General Seybold, let me interrupt you right there. Let this be off the record.

(Off the record.)

General SEYBOLD. I have just one more item on that. There are other points, like the high bridge, and so on, which I think we don't have to discuss too much. The other major point which will affect us

is the loss of privilege by the Panamanian employee who lives in Panama, to use our commissaries. It has been traditional that our commissaries by the other treaties had a perfect right to furnish supplies to all employees, no matter where they lived. Whether they lived in the Republic or whether they did not, they could draw on our commissaries for their subsistence, clothing and such. By unilateral agreement that privilege is now withdrawn, and the majority of the local labor will be forced to purchase on the Panamanian market their supplies for subsistence. This means in effect, Mr. Chairman, something which is not too well understood. It means that these employees who are the mass of the labor group will revert to a pattern of Panamanian living in contrast to a quasi-American pattern which they have been following heretofore.

In other words, whereas they bought, as we buy in our markets, packaged goods which fit our business procedures, they will now go to the Panamanian market and buy the raw supplies which are handled in the Panamanian way. I can't describe it any differently other than to say they go to the Panamanian pattern, like all the other people of Panama.

There have been, as you probably have heard, many suggestions of how much additional cost or how much savings they will make back and forth. Of course, this provision was inserted at the insistence of the Republic of Panama. My opinion I give for what it is worth. I feel sure the net result will not be anywhere near what is stated because, as I say, they go to the pattern of the Panamanian living rather than the American living.

I think it is one of the best things which could have been done for the Republic. I have advocated since I have been there that we need the work of the citizen of Panama. For instance, he comes to work for us, but he should live and spend his time in Panama, so his economic value to the Republic is put right back in there. He should go to their schools and churches and all of that, and plow back into the Republic his economic value to the State. Heretofore he has looked to us for this type of support. He has looked to us a great deal for schooling and things of that sort, although we never have offered education in general to the Panamanian citizen living in Panama.

However, that change is coming. We are approaching it very carefully. We are moving into all of these situations slowly trying to foresee its effect on the zone, trying to see its effect upon the people. I don't believe they will affect the American resident very much, in fact, very little if any. But there are some other portions of the treaty which require us to procure our supplies from Panama whenever it is feasible to do so and when it is manufactured there.

That is a field which has not been probed very much. Again, at this time I would be unable to foresee what effect it will have on the economics of living in the Canal Zone.

The direct payments to the Republic for an increased annuity brings no difficulty at all as affects the operation. Surely, the company has either to pay that additional amount or not. The problems are those which directly affect the people, Mr. Chairman. Those are the ones with which we are greatly concerned.

Mr. ELLIOTT. Mr. Roosevelt.

Mr. ROOSEVELT. Governor, I enjoyed your statement very much. I am only sorry I wasn't able to go down with the rest of the members. Governor SEYBOLD. We regret that you were not able to do that, Mr. Roosevelt.

Mr. ROOSEVELT. I look forward perhaps to paying you a visit in the future.

I would like to ask one or two questions. No. 1, do you or any of the United States officials have anything to do or any influence in the setting of a minimum wage, let's say, by the Republic of Panama itself?

Governor SEYBOLD. No, sir, we don't; but we feel, as I am sure everyone will agree, that our wage is affecting the minimum wage of Panama. In other words, they follow us. But of course we have no direct influence on anything in the Republic.

Mr. ROOSEVELT. That is exactly my point. In other words, under your suggestion here the Governor of the zone would set the minimum wage, which would in effect become the minimum wage for the Republic also.

Governor SEYBOLD. No, sir; I am sorry. We feel that it follows us. As we move, they move, too. They are reciprocal. They affect each other.

Mr. ROOSEVELT. They may be reciprocal, but which is the stronger force? Are the officials of the United States in effect by what they set as the minimum wage actually going to set the minimum wage also for the Republic?

Governor SEYBOLD. No. Of course, Mr. Roosevelt, the Republic doesn't have any minimum wage, as I understand it. It is only the effect of our relatively small number. You see, our 10,000 compared to the thousands of employees in Panama is not a ruling factor, but it is a factor which assists in increasing their economy and basis wage. Mr. ROOSEVELT. What is the total employment in Panama? Have you an idea?

Governor SEYBOLD. I don't know about the total employment, Mr. Roosevelt. I will state the few facts I have concerning it. They have about 840,000 people in the whole Republic. I imagine there are about 180,000 or so in the large city of Panama City itself. Of course that is the labor market we are really concerned with, because they live right across the street from us and there is no fence between us. There are probably records which could be obtained from reports of that in the Republic which we might furnish the committee if they care to have it. I can't substantiate it.

Mr. ROOSEVELT. What I am getting at is the relative ratio, the number of Panama citizens that we employ to the total number employed. Governor SEYBOLD. It is very small.

Mr. ROOSEVELT. Would it be less than 10 percent?

Governor SEYBOLD. I would say so.

Mr. ROOSEVELT. Thank you, Mr. Chairman.

Mr. FJARE. If Mr. Coon yields, I would like to ask a question related to those of Congressman Roosevelt. You mentioned that the establishment of a base pay or minimum wage within the Canal Zone, as the Canal Company has now done, reflects in the Republic of Panama as such. Is that a theory or is there substance in fact? Would you say that 4 years ago the employee in the Republic of Panama was earning less than he is today?

Governor SEYBOLD. I think so, yes, sir.

Mr. FJARE. About how much?

Governor SEYBOLD. I can only give you these things in general. You see, we have no access to this information and I think they themselves are not too sure of the statistics which they gather. I feel sure that in these 4 years there has been an increase in the wages of the Panamanians. Of course there definitely has been in our own case. Mr. FJARE. Should we in fact establish a dollar an hour as the minimum wage and pay the Panamanians in the Canal Zone a dollar, would that relationship have a sufficient impact on the Republic of Panama to be seriously considered? On

Governor SEYBOLD. I think it would be felt, considerably so. the other hand, we must remember that Panama has no industry. Its agricultural people are very near just the fringe. They are just existing. Panama itself is a country of storekeepers. It has always existed on trade in the two centers. I can't believe, as they have stated time and time again, that living right next to the dollar minimum wage, which is at least 250 percent more, maybe 300 percent more than they can pay, it can fail to reflect back into that. I don't think you can live that close without having it happen.

Mr. FJARE. I certainly agree, particularly since our recent trip down there. It would appear obvious to me if you were to live, if you could, within a block of the Canal Zone line it would create quite a turbulent situation in the city of Panama City at least, a tremendous clamor for that opportunity across the line for a dollar, 3 or 4 times as much as they are making.

Governor SEYBOLD. They look on the other side of it, Mr. Congressman, in a very realistic manner.

Mr. FJARE. By "they" do you mean the Government of Panama or the people?

Governor SEYBOLD. I am thinking mostly of the chambers of commerce and the folks of that sort, who of course think of the economy of Panama in terms of the income of dollars, no matter how it may be done.

Mr. FJARE. Aren't we realizing a rather rapid growth of Panama City and that area down there? I am speaking of tourists and travel.

Governor SEYBOLD. Yes; it has had an extremely rapid growth. Mr. FJARE. You anticipate industrial growth down there? Governor SEYBOLD. I just don't know.

Mr. FJARE. I don't mean factories.

Governor SEYBOLD. You mean the processing of goods and services. They have some rather attractive openings and are doing a fine job trying to bring in operations which certainly should help them. The latest one which may be accomplished is the thought of putting in a large refinery to serve Panama and the Canal Zone. There are things of that sort. They are very forward minded people and very accomplished and able, may I say.

Mr. FJARE. That is all, Mr. Chairman.

Mr. Coon. Governor Seybold, I want again to compliment you on this exceptionally fine statement. It contains some helpful information.

I have a few questions which you have answered regarding the use of contractors there. Some of our previous witnesses have questioned

their ability to do a good job, and I think you have shown that they have done just as good a job as if you were doing it for your own people. We have had previous witnesses who talked about the use of hiring the local help there and getting it cheaper, and so displacing American citizens, but I think you have pretty well answered that by showing that you do the same there as you do in any other country, and that is to hire the local help for the reason that you are supposed to under the treaty and also it would save the taxpayers money. You have pretty well answered all my questions and I thank you for your testimony.

Mr. ELLIOTT. Just this last question, Governor: I wonder if your plan could not be achieved by excluding the Panama Canal Zone from the coverage of the Wage and Hour Act and thus allow your plan to be put into operation and effect by administrative order of the Government of the Canal Zone. Would that be possible?

Governor SEYBOLD. I think we would welcome submitting legislation through the proper channels covering our thoughts. I think I have it in mind so it is pretty well blocked out. Time has not permitted me to clear my statement with the Bureau of the Budget, although I am sure there is nothing in here that they would object to our presenting before this committee. My staff and I have drafted, although it isn't in form to bring before this committee now, legislation embodying the principles and thoughts I have outlined here. I would welcome the opportunity to get that through to this committee for consideration because I am certain, Mr. Chairman, that our problems in the Canal Zone are unique among Government operations anywhere.

Mr. ELLIOTT. Governor, our record on this matter will be open for some time because we have not completed our hearings yet. I would like to say to you that if at any time within the next 6 weeks, we will say, you have matters that you would like to have become a part of the record in this case, we will be glad to receive them. If you will forward them to the committee they will be made a part of the record. Governor SEYBOLD. We appreciate that, Mr. Chairman.

Mr. ELLIOTT. Again I want to thank you for your kind appearance and the information you have given the committee.

(Supplemental information furnished by the witness follows:)

Mr. RUSSELL C. DERRICKSON,

CANAL ZONE GOVERNMENT,

OFFICE OF THE GOVERNOR, Balboa Heights, C. Z., April 12, 1956.

Chief Investigator, Committee on Education and Labor,

House of Representatives.

DEAR MR. DERRICKSON: Enclosed are copies of the additional questions submitted to me in writing with your letter of March 29 together with my answers. Although the point is not specifically covered in these questions and answers, I wish to reiterate the view expressed in my testimony that exemption of the Canal Zone from the minimum wage provisions of the Fair Labor Standards Act would be preferable to continuance of the existing situation which in my view is completely unrealistic in the light of actual employment conditions in the Canal Zone and in the Republic of Panama.

Sincerely,

J. S. SEYBOLD, Governor.

(The supplemental statement referred to is as follows:)

Question: H. R. 9129 and H. R. 9144, the principal bills under consideration by this committee, would exempt the Canal Zone from the provisions of the Fair Labor Standards Act. If this were done by law, would you, as Governor, have