Joint Statement with President Arias of Panama.

We have talked over in the most friendly and cordial manner the field of Panamanian-American relations. The fact that the Canal Zone is set down in the midst of Panama makes us neighbors in the most intimate sense of the word and it is in the interest of both our countries that we should be "good neighbors."

We are in accord on certain general principles as forming the bases of the relations between Panama and the United States in so far as the Canal Zone is concerned, as follows:

1. Now that the Panama Canal has been constructed, the pro. visions of the Treaty of 1903 between the United States and Panama contemplate the use, occupation and control by the United States of the Canal Zone for the purpose of the maintenance, operation, sanitation and protection of the Canal.

2. In view of that purpose the Republic of Panama is recognized as entitled, as a sovereign Nation, to take advantage of the commercial opportunities inherent in its geographical situation so far as that may be done without prejudice to the maintenance, operation, sanitation and protection of the Panama Canal by the United States of America which is earnestly desirous of the prosperity of the Republic of Panama.

3. The Government of the United States would sympathetically. consider any request which the Government of Panama might make for the solution by arbitration of any important question which might arise between the two Governments and may appear impracticable of decision by direct negotiations, provided that such question is purely economic in its nature and does not affect the maintenance, operation, sanitation and protection of the Canal.

With regard to the activities of the United States in the Canal Zone, Panama feels that some of them constitute a competition prejudicial to Panamanian commerce. The United States has agreed to restrict and regulate certain activities; for example, special vigilance will be exercised to prevent contraband trade in articles purchased from the Commissaries; sales of "tourist" goods from the Zone Commissaries for resale on ships transiting the Canal will be prohibited; sales of other goods to ships from the Canal Zone Commissaries will be regulated with the interests of Panamanian merchants in view.

The services of the United States hospitals and dispensaries in the Canal Zone will be limited to officers and employees of the United States Government and of the Panama Railroad Company and their families, excepting only in emergency cases; admission to the restaurants, club houses and moving-picture houses in the Zone will be similarly restricted.

The United States also intends to request of Congress an appropriation to assist in repatriating some of the aliens who went to the Isthmus attracted by the construction work of the Canal and have now come to constitute a serious unemployment problem for Panama.

The clause binding lessees or contractors of the restaurants to purchase their provisions from or through the Commissaries will be abrogated. The United States Government furthermore is prepared to make the necessary arrangements in order that Panama may establish at the terminal ports of the Canal houses and guards to collect duties on importations destined to other portions of Panama and to prevent contraband trade.