Chinese presence in Panama might trigger canal treaty violation, Senate panel told

Yahoo

28-01-2025

Jan. 28 (UPI) -- President Donald Trump's suggestion of the United States taking control of the Panama Canal has a legal basis partly due to potential treaty violations involving Chinese activities in Panama, a Senate committee was told Tuesday.
The Senate Commerce, Science and Transportation Committee heard testimony from several experts, some of whom suggested the United States might have legal standing to reclaim control of the canal.
"Panama has emerged as a bad actor" and "exploits an asset," committee Chairman Sen. Ted Cruz, R-Texas, said.
He said Panama has "flagged dozens of vessels in the Iranian ghost fleet" and awards contracts to China without seeking competitive bids.
China, meanwhile, is using a "debt-trap" system and the "belt and road" initiative to gain footholds in Panamanian ports and other areas when the debt accrued to build them aren't repaid as agreed, Cruz said.
Ranking member Maria Cantwell, D-Wash., agreed it's important for the United States to take a closer look at Panama Canal operations and its effect on shipping costs and carrier delays.
"Anything our committee can do to grow our maritime economy, I am all for," Cantwell said.
Chinese presence in Panama
Chinese entities in Panama might violate the 1977 treaty transferring ownership and control of the Panama Canal, members of the Senate Commerce Committee were told on Tuesday.
The 1977 treaty negotiated and signed by the Carter administration requires Panama to ensure neutrality in the canal's operations, Eugene Kontorovich, law professor at George Mason University's Scalia Law School, told the committee.
The treaty requires a "special regime of neutrality" by Panama regarding the canal's daily operations, "which means open to all nations, equitable tolls and fees, exclusive Panamanian operations, no foreign military presence," Kontorovich said.
"Only Panama shall operate the canal," he added, but the treaty is unique in that it does not prescribe a method to determine any potential violations and, instead, leaves it up to representatives of the United States and Panama to decide for themselves when something might amount to a treaty violation.
The treaty "prohibits foreign operation of the canal, as well as the garrisoning of foreign troops," Kontorovich said.
The presence of companies owned by the Chinese government or by Chinese entities that are controlled by the Chinese government might rise to the level of at treaty violation.
He said the treaty is "silent on how much control is too much" but suggested the "presence of foreign security forces could violate neutrality" and "belligerent, Chinese covert agents could be a violation."
The United States and Panama equally are authorized to maintain neutrality over the canal.
"Each party can take unilateral action" and "can act by whatever means necessary to keep canal operations neutral," Kontorovich said.
Corruption and foreign influence
While the 1977 treaty ceding the Panama Canal to Panama requires neutrality and no foreign interference, both are occurring, Federal Maritime Commission Chairman Louis Sola told the committee.
"This sector has faced persistent challenges, including corruption scandals and foreign influence, particularly from Brazil and China," Sola said.
"Any challenges in Panama's maritime sector, including corruption lack of transparency or foreign influence, can have a direct or indirect impact on the operations and long-term stability of the canal."
The Panamanian government controls all ports, water rights and the world's largest shipping registry, but China in particular is eroding that control, Sola said.
He suggested corruption and foreign influence in Panama is complicating the mission of the Panama Canal Authority's ability to maintain operational efficiency in resilience.
"Since 2015, Chinese companies have increased their presence and influence on the canal," Sola said. "Many of these companies are state-owned, [and] many are linked to the Chinese military."
He said the Panama Canal is "vital" to the U.S. economy with more than 75% of its traffic coming from or heading to U.S. ports.
Sola suggested U.S. companies should play a leading role in managing the canal while reducing reliance on Chinese contractors in Panama.
Joe Biden remains one of its commissioners.
"The canal depends on large supplies of water because it is a water bridge over a mountainous area that is above sea level," Maffei said. "A trend of worsening droughts in the region imposed draft limitations and reduced the number of ships that can transit the canal."
He said a de facto closure of the Suez Canal has increased demand for transits via the Panama Canal, which has given rise to a bidding process to determine which vessels can use the canal.
The Panama Canal Authority is working to change the current system for determining which vessels can transit the canal, but Maffei said he has doubts about the canal's future reliability - especially when another drought limits the amount of available water for the canal system.
Global, U.S. trade depend on efficient canal
The Panama Canal is a global asset that is especially beneficial for trade between the United States and Asian nations, Joseph Kremek, president and chief executive officer of the World Shipping Council, told the Commerce Committee.
The trans-Pacific trade route refers to all goods flowing between Asia and the United States, and the Panama Canal is a vital link in that route.
Using the canal enables cargo ships to arrive at ports along the East Coast and Gulf Coast of the United States in 30 days versus 40 days when using alternative routes, Kremek said.
The ports of Houston, New Orleans, New York, New Jersey and Savannah are among those that depend the most on the canal for efficient transport of goods to and from the United States.
The exports of goods include agricultural goods, such as soy beans, corn, cotton and livestock, Kremek said.
The goods imported are among many of the most commonly used items by U.S. consumers.
"These goods are the clothes on your back, the shoes on your feet or likely the phone in your hand," Kremek told committee members.
He said the amount of containerized trade to the United States has expanded greatly in recent years, including a 15% increase in 2024.
Nearly two-thirds of all seaborne trade in the United States passes through the Panama Canal and accounts for $2 trillion in economic output, Kremek said.
The trade passing through the canal also supports 6.4 million U.S. jobs and $442 billion in annual earnings, he added.
When water levels are low, the effect on the U.S. economy is significant.
Prior to 2024, drought conditions caused reduced the number of daily transits through the canal from 36 to 22 and forced ships to carry fewer containers to reduce their respective draft levels.
He said the Panama Canal is "critical" to the U.S. economy. Committee members agreed.