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jection of "potential losses" whereas these uncertainties could also end up being beneficial to the Canal.
 With regard to the effect of inflation on increased tol rates, the staff study quotes a recent analysis prepared by International Research Associates as fPlows: "The maximum attainable revenue was approximately 40 percent greater than the projected revenue without a toll increase . and . the attainment of that revenue would require a toll increase in the range between 75 percent to 100 percent." The staff study then applies an inflation rate of 6 percent per annum to Canal expenditures to the year 2000 and concludes that a substantial deficit could result. However, a 6 percent rate of inflation would affect the price of competitive transportation systems as well, thus permitting further canal toll increases in the future. When the staff study assumes that the maximum toll revenue available during the life of the treaty is 40 percent above current rates, it distorts the conclusion of the IRA study which indicates that the maximum attain able revenue, as calculated, is based on the current relationship of transit costs and the costs of alternatives. The IRA analysis does not imply that a 75 percent to 100 percent toll rate increase, producing a 40 percent increase in toll revenue- is all that can be derived for the rest of the century.
 According to a January 1978 study by Arthur Anderson & Co., a one-time toll increase of 19-27 percent at the beginning of the initial five-year period would cover all costs of operation, including payments to Panama and inflation in operating costs for that period. The Panama Canal Company has estimated that a cumulative increase of 29 percent would be necessary for the period through 1983 under the treaty, and that a cumulative increase of 20 percent for the period 1981-84 would be necessary even without a new treaty to offset inflation. The impact of tht- initial toll increase on U.S. consumers and shippers should not exceed $15 million per year; it would involve a transportation cost increase of less than 1 percent, and its overall effect on our $2 trillion economy would be negligible.

 ESTIMATED VALUE OF ASSETS TRANSFERRED TO PANAMA
 The net book value of existing Canal Company and Canal Zone Government property to be transferred to Panama by the terms of the Canal Treaty is $194 million. Panama would also receive capital improvements to the Canal and its facilities made during the Treaty's lif etime which the Canal Company, bsed on planned capital improvements, currently estimates at $454 million. The approximate total acquisition and improvement cost of military facilities as of FY 1978 to be turned over to Panama by the end of the treaty is estimated to be $352.9 million. However, the true value of the Canal and its related assets cannot be measured in terms of financial investments which would be worthes- to us if we could not continue to use the Canal. The true value to the United States is best measured in terms of both pa st benefits and our ability to continue to use the waterway which the new treaties guarantee.

 POTENTIAL COST FOR ITEM S NOT COVERED 13Y TOLLS
 Payments to Panama under the Panama Canal Treaties will be made from Canal revenues, not tax dollar.,? MNoreover, all operating- expenses of the new entity will be paid from Canal revenues. This would include, for example, the cost of conducting inventories of the Panama Canal enterprise as a result of the treaty. The staff study incorrectly concludes that the costs of such inventories,, would be drawn from the general fund of the Treasury.
 Administration spokesmen have testified on several occasions before Con gressional Committees that the transition from our present role to our proposed role un-der the new Treaties would entail some costs in the U.S. bnd--et. One major cost would be relocation of defense installations, estimated at $43 million for the first three years. Another would be an early retirement Trogramn for Canal enterprise and certain other employees. The Treaty provides for an optional early retirement program as an employee security assurance for Canal1 enterprise employees. The desin of the program, however, will11 be at U.S. discretion. The programs whioh have been considered within the Administration range in cost up to $150 million (current value). There will 1,0 additional DOD costs resulting from a mier Ter of the Canal Company aind DOD activities, anid assumption of any non-reimbursable costs for health, education and other support functions. In the letter to Senators from Secretaries Vance, Brown and