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ting the authority to set it aside. We believe it can be proven that the reasons used to set it aside in the past are no longer valid and it should now be permanent legislation.

We offer the following amendment to the present section 248 (e) of title 2 of the Canal Zone Code. Change the perieod to a colon after “pay the premiums of such bonds." and add: Provided, That no officer, agent, attorney, or employee shall be appointed or hired directly or indirectly except for temporary employement in case of emergency on the Canal Zone to occupy a skilled, technical, clerical, administrative, executive, or supervisory position unless such person is a citizen of the United States or the Republic of Panama.

Senator DUFF. Is that because of transients?

Mr. MUNRO. No. At the time it was put in it was to keep the American citizen employed in the Canal Zone for security reasons, and to keep the Canal "American.” At that time there were considerably more non-Panamanian citizens than there are at the present time.

Senator DUFF. It isn't much of a problem at the present time?

Mr. MUNRO. No; it isn't. With the saving clause which I will bring up later, keeping those that are now in employment with 15 years service on the job, I don't believe it will be any problem.

This limits employment on the Canal Zone to citizens of the United States or the Republic of Panama in all but laborer and unskilled positions. We believe that this is in accordance with the general employment practice of both countries to hire only citizens in Government positions. The phrase "except for temporary employment in case of emergency” is sufficient language to handle all situations that can arise in the future.

The next section is: Provided, however, (1) That notwithstanding the provision in the act approved August 11, 1939 (53 Stat. 1409), limiting employment in the above-mentioned positions to citizens of the United States from and after the date of approval of said act, citizens of Panama may be employed in such positions.

This language allows citizens of Panama to occupy the named positions.

That takes care of a law which was passed August 11, 1939, limiting all employees on the Canal Zone to United States citizens.

(2) That at no time shall the number of Panamanian citizens employed in the above-mentioned positions exceed the number of citizens of the United States so employed, if United States citizens are available in continental United States or on the Canal Zone.

This language limits the number of Panamanian citizens employed in these positions to the number of United States citizens so employed. This will satisfy the 1955 treaty commitment of equal treatment.

Regardless of opinions expressed before the ratification of the 1955. treaty, the United States and the Republic of Panama did ratify the treaty. The General Accounting Office nor anyone else has any other choice than to live up to the commitments.

(3) That nothing in this act shall prohibit the continued employment of any person who shall have rendered 15 or more years of faithful and honorable service on the Canal Zone.

This is a saving clause for non-United States, non-Panamanian citizens who have 15 or more years' service.

(4) That in the selection of personnel for skilled, technical, administrative, clerical, supervisory, or executive positions the controlling factors in filling these positions shall be efficiency, experience, training, and education.

This language establishes a recruitment criteria believed necessary for the protection of all concerned. There can be no objection to it as it contains the standards normally applied to all Federal positions.

(5) That all citizens of Panama and the United States rendering skilled, technical, clerical, administrative, executive, or supervisory service on the Canal Zone under the terms of this act (a) shall normally be employed not more than 40 hours per week.

This language establishes a 40-hour week. Insofar as this has been the practice for years, no objection can be raised to this procedure.

(b) May receive as compensation equal rates of pay based upon rates paid for similar employment in continental United States: Provided further, That citizens of United States shall receive an additional 25 percent.

This language is in accordance with the 1955 treaty which stipulates equal pay for equal work except United States citizens shall receive an additional 25 percent.

In line with the General Accounting Office's suggestion that the cost of living on the Canal Zone should be geared to that in Washington, D. C., it is only reasonable to assume that they have no objection to the establishment of United States wages. It is our position that as the treaty stipulates there shall be one wage scale for the incumbent of a position, regardless of citizenship, it must follow that the United States rate must prevail. It is obvious that Washington cost of living and United States wages go hand in hand, and it would be ridiculous to separate them.

Senator DUFF. How does that apply to the Panamanian citizens? Their cost of living is not equal to ours in any way, is it?

Mr. MUNRO. The treaty stipulates that there shall be one wage schedule established in the Canal Zone.

Senator DUFF. I understand that. I was asking apart from that?

Mr. MUNRO. If they live in the Canal Zone their cost of living is the same as the United States citizen because they deal in the same stores.

Senator DUFF. Do most of them live in the Canal Zone?

Mr. MUNRO. No. The majority of them live in the Republic of Panama.

Senator DUFF. Where the cost of living would be very materially lower, wouldn't it?

Mr. MUNRO. I am unable to answer that question, although it has been testified that the cost of living in the Republic is higher than it is in the Canal Zone. That would be something

Senator DUFF. I would want that demonstrated.

Mr. MUNRO. That is what I was saying, someone should actually investigate conditions to find that out.

Senator DUFF. Continue, please.

PAYMENT OF EXCESS FUNDS INTO TREASURY

Mr. MUNRO. We support the principle that the capital investment in the corporation should be reduced as rapidly as possible. We do, however, believe that the retention of working capital for only 1 fiscal year is insufficient to conduct the necessary operation of the canal.

This is a step backward to the former situation whereby activities toward the end of the fiscal year were curtailed until the next fiscal year for appropriation reasons.

TOLLS

We call to the committee's attention that section 412 (b) of title 2 of the Canal Zone Code is the pocket book of the Panama Canal Company. Any amendment made elsewhere will reflect on the language of this

section. We point out that any costs not recovered elsewhere nor written into the tolls formula will fall on the United States Treasury.

We have spent considerable time and effort to evaluate the position of the United States citizens working on the Canal Zone and are desirous of establishing permanent working conditions and work force. We will help the committee and its staff in any manner possible to bring about the return of stable conditions on the zone.

We appreciate the opportunity to present our views on this important subject to the committee.

Thank you.

Mr. BOURBON. On page 2 you say "The committee can write a clean bill.”. Are you referring now to the clean bill that already has been submitted by Mr. Sinclair and Mr. Mayer?

Mr. MUNRO. No, sir. As you will notice in our testimony, there are certain language changes which still must be made in their clean bill. One in particular that I have in mind is the fact that they exclude only the all-cost formula and the applications of Bureau of Labor Statistics to Company/Government employees. Under their language you would have to have 2 sets of prices and 2 sets of cost control because you have other than Company/Government employees on the Canal Zone. So that language would have to be changed to include the few other Federal employees.

Senator DUFF. Your idea of the clean bill is a bill to contain what you bring forth in your statement?

Mr. MUNRO. That is correct.

Mr. BOURBON. I gather from your statement at the top of page 4 that you are not in particular sympathy with the efforts to reduce the tolls? You say a penny saved now may cost the canal dollars and is not economy; a few dollars saved to a small group may cost many dollars later.

Mr. MUNRO. Our position is that the Canal Company/Government should operate as economically as possible considering the over-all picture of the canal to the security and the welfare of all the people in the United States.

Mr. BOURBON. Have you taken any position on the continuance of such activities, for instance, as the Panama Steamship Company, which General Accounting Office has said is rather costly, and whose deficits of course have to be made up through tolls?

Mr. MUNRO. In the particular case of the steamship line, or any other of the activities that are not in the opinion of the General Accounting Office self-supporting, I would like to see figures ti indicate the amount of money which would be saved by the deletion of that activity. In other words, at present the steamship line is paying all their out-of-pocket expenses, plus an amount to be credited to general overhead and Canal Zone Government costs, this amount appears in the financial statement and budget of the Company. If the Panama Line or any other division was stopped, how much would the Canal Zone Government costs be decreased, and how much would the overhead of the Company be decreased by the deletion of the activity ?

Then we say consider the benefits of the activity how much it would cost to get that service performed elsewhere, and then use a little common sense in weighing the benefit of having the Company carry on certain activities.

Mr. BOURBON. I would gather that the General Accounting Office in its audit would necessarily have to do that before making recommendations, for instance, that they should reduce and do away with one ship in the interests of economy, particularly when it was shown that in 1 year they had a deficit of more than $350,000 on the steamship line itself. That is a lot of money to make up in tolls.

Mr. MUNRO. If it has a $350,000 deficit on the all-cost formula, by reducing the Panama Line to 2 ships or doing away entirely with the steamship line as a Company activity, I ask would the deletion of the activity lower the Company's general overhead expenses and the cost of the Canal Zone Government the equivalent of $350,000 which they claim are not being paid now? That is the point I am trying to bring out.

Mr. BOURBON. It would do it proportionately, wouldn't it? Proportionate to the amount of money that it had contributed to the general overhead administrative costs?

Mr. MUNRO. No. I don't think so.

The way I look at it is that they are paying a part now. If there is no saving you are going to lose that part that they are now paying. So some other activity, which will be tolls, will have to make it up.

Mr. BOURBON. I won't press the point.
Senator DUFF. Thank you, Mr. Munro.
The next witness is George D. Riley.

STATEMENT OF GEORGE D. RILEY, LEGISLATIVE REPRESENTA

TIVE, AMERICAN FEDERATION OF LABOR-CONGRESS OF INDUSTRIAL ORGANIZATIONS

Mr. RILEY. Mr. Chairman, the American Federation of Labor and the Congress of Industrial Organizations is in accord with the position expressed here by Howard E. Munro, who represents the Central Labor Union and Metal Trades Council in the Panama Canal Zone. Zone.

Mr. Munro is recognized as thoroughly informed on the practices in the zone and on the needs of employees who maintain and operate the affairs in the zone on a detailed basis.

The Bureau of Labor Statistics market basket approach will place the consumer price system upon an automatic basis. It, therefore, is necessary that the Canal Zone wage system be based upon United States wages. In this manner, the Washington, D. C., BLS system will be workable.

The recruitment differential for overseas service, together with the market basket provisions should go far toward restoring the full measure of morale which is so much to be desired in that locality.

The AFL-CIO is in full accord with the further proposal by Mr. Munro that those possessing American or Panamanian citizenship

should be the ones solely eligible for employment in civilian jobs, except for temporary work.

Temporary employment is excluded from provisions of Public Law 330 of this Congress in setting forth prohibition against hiring under certain circumstances; excluding temporary employees will, of course, be consonant with Public Law 330.

Likewise, the conditional language which has a way of creeping into so many laws affecting administration of the Canal Zone and which permits suspension of such laws at Executive discretion has long since outlived any usefulness it might have had at any time. .

In all other remarks Mr. Munro has made, under the general heading of "Employment Practices,” well-considered suggestions which adoption by your committee will find are purposeful and in the good name of improved administration and personnel practices.

The Canal Zone employees have an important stake in the question of cost recovery formula. Mr. Munro's position in favor of exempting services to employees and the supplying of goods from the all-cost formula is basically sound.

Conceivably it is possible to pyramid such costs skyhigh to the end that employees can be thoroughly justified in assuming that the practice is to be in perpetuity, that he and his family will be far better off to pack up and leave the zone to those who are willing to accept this form of abuse or are helpless and must remain to face their fates come what may,

Charging back to the employee just about everything which comes into or which happens in the zone is but to hang the dead albatross around the employee's neck. This is the kind of news which travels fast. The zone isn't going to get and retain the services of the best available personnel under such conditions.

These are some of the reasons we fully endorse Mr. Munro's observations on this point.

The other provisions he has advanced in his remarks are sufficiently clear in purpose as to require no comments. If his views are given proper weight, your committee will be amply compensated for your investment of time in receiving the thinking he has advanced.

Senator DUFF. Thank you, Mr. Riley. The next witness is Thomas G. Walters.

STATEMENT OF THOMAS G. WALTERS, OPERATIONS DIRECTOR,

GOVERNMENT EMPLOYEES' COUNCIL, AFL-CIO Mr. WALTERS. By way of introduction, Mr. Chairman, my name is Thomas G. Walters, operations director of the Government Employees' Council of the AFL-CIO, 100 Indiana Avenue NW., Washington, D. C., phone Ex-3-2820 and 3-2821.

The Government Employees' Council of the AFL-CIO is made up of 22 national and international unions whose membership, in whole or in part, are civil service employees. The total Federal and postal employee membership of the Government Employees' Council is more than 500,000.

Mr. Chairman and members of the committee, as operations director of the Government Employees' Council I have had the opportunity and privilege of discussing and conferring with Mr. Howard E. Munro, legislative representative of the Central Labor Union and

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