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Yahoo
29-01-2025
- Business
- Yahoo
US senators examine China's influence over Panama Canal
US senators heard sharply different analyses about Chinese influence over the Panama Canal on Wednesday, with some experts suggesting solutions ranging from enhanced trade partnerships to military intervention to regain control of the strategic waterway. The hearing before the Senate Commerce, Science and Transportation Committee attempted to examine President Donald Trump's claims that China has gained undue control over the canal, which the US transferred to Panama in 1999 under terms of a 1977 treaty. Trump has contended that Panama's authorisation of increased Chinese commercial activity violates the canal's neutrality agreement. Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team. "We gave it [the canal] to Panama, not China, and we're taking it back," Trump declared in his inauguration address, alleging treaty breaches to support a potential intervention. But China's direct involvement remains a matter of debate. In 2018, a Chinese state-owned enterprise - China Harbour Engineering Company - secured a US$1.4 billion contract to construct the canal's fourth bridge. US lawmakers have raised concerns about Hutchison Port Holdings, a Hong Kong-based private company operating the Balboa and Cristobal ports at the canal's Atlantic and Pacific entrances. The firm received a 25-year operating extension in 2021. Hutchison is not involved in managing the canal itself. But Senator Ted Cruz, the Texas Republican who is the committee's chair, said that the company's mere presence in ports near the Atlantic and Pacific access routes could constitute a violation of the 1977 treaty's neutrality clause. Cruz said that Article Five of the treaty "limits any foreign control", and speculated that as the Communist Party advanced "its global economic contest" against Washington, it might develop a "militaristic interest in the canal". Eugene Kontorovich, a senior research fellow at the conservative Heritage Foundation, testified that while determining a treaty violation "is a mixed question of law and fact", either party can decide if terms have been breached. "It was clear that the treaty was understood as giving both sides separately the right to resort to use armed force to enforce [its] provisions". Unlike typical international agreements requiring third-party arbitration, Kontorovich said, the Panama Canal treaty grants both parties independent authority to assess violations of its neutrality. Thus, under Article Five, "we can decide that the neutrality regime is being threatened and then act with whatever is necessary to maintain the neutral channel unilaterally," Kontorovich said, suggesting possible military measures. Whether the operations of a Hong Kong company would constitute a violation of the principle of neutrality, he acknowledged, "is a mixed question of law". "[If the] Chinese government was involved in procuring these contracts, [although it] strongly provides sort of additional support for the notion that these companies are serving some kind of governmental interest, it wouldn't be a violation," he said. Louis Sola, chairman of the Federal Maritime Commission, told the committee that "American companies should play a leading role in enhancing the canal's infrastructure by supporting US firms". But asked by Senator Andy Kim, Democrat of New Jersey, about potential blockades by Hutchison Ports or the Chinese government, Sola said he had no evidence of interference. Instead, he noted that the treaty transferred "not just the canal, but all the land and water around it", including port facilities. Thus, Sola contended, Hutchison's port operations at both canal entrances theoretically enabled the company to "block traffic" if desired. Kim rejected calls for US intervention, saying that aggressive rhetoric could undermine the Panama Canal Authority's independence. Senator Andy Kim, Democrat of New Jersey, said that aggressive US rhetoric about the canal could harm bilateral relations with Panama and help China's standing in Central America. Photo: EPA-EFE alt=Senator Andy Kim, Democrat of New Jersey, said that aggressive US rhetoric about the canal could harm bilateral relations with Panama and help China's standing in Central America. Photo: EPA-EFE> Kim challenged the Republican stance, arguing that their suggestions of treaty violations and military intervention could damage US-Panama relations and wind up boosting Chinese influence in Central America. "We try to have nuance and precision with words that we use," Kim said. "Otherwise, it very much looks like some of what we talk about is going to be perceived as undermining the Panama Canal Authority." Senator Maria Cantwell of Washington, the committee's senior Democrat, said she was "deeply concerned" about China's growing sway over critical infrastructure in Latin America and called for senators to travel to Panama to verify Trump's claims. She also argued that any Chinese influence needed to be countered by modernising free trade agreements and an "aggressive strategy" of infrastructure investment. This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.
Yahoo
28-01-2025
- Business
- Yahoo
Senate debates ways to gain leverage over Panama Canal
WASHINGTON — President Donald Trump vowed to 'take back' the Panama Canal in his inaugural address, but he likely wouldn't be able to do so and still be within the confines of the 1977 treaty that signed over authority to Panama, according to an international law expert. Testifying before the Senate Commerce Committee on Tuesday, Eugene Kontorovich, a senior research fellow at the conservative Heritage Foundation, told lawmakers that countries 'need to think long and hard' before signing treaties that effectively give away strategic assets as important as the Panama Canal. 'The U.S. is free to cancel this treaty or withdraw from it at any time, but given that the U.S. has transferred control and sovereignty of the Canal Zone to Panama, the cancellation of the treaty would not necessarily reverse the concession' and return the canal to the U.S., Kontorovich said. 'Now, it is the case that America can take all sorts of measures to insist on neutrality. But a kind of territorial control is not a clear remedy.' Much of the hearing centered around whether and how much China is effectively controlling freight flows through the canal given that Chinese-backed terminal operators run terminals on both sides of the waterway – a potential violation of the neutrality provided under the current treaty between the U.S. and Panama. Asked by Sen. Ted Cruz, R-Texas, about the range of remedies available if Panama were found in violation of the treaty, Kontorovich said the use of armed force to enforce the treaty's provisions – as opposed to taking outright control of the canal itself – is an option. 'Panama agreed that the U.S. could enforce this regime of neutrality by force,' he responded. 'Of course, armed force should never be the first recourse for any kind of international dispute and should not be arrived at rashly before negotiations and other kinds of options are exhausted. But it's quite clear that the treaty contemplates that as a remedy for violations.' Also discussed during the hearing was the Panama Canal Authority's practice of giving canal transit times to the highest bidder when water levels in the region are low, which was the case during a water shortage in the region starting in 2023. 'Our concern [was] that the Canal Authority was collecting much more money per transit during the crisis than it had before' the shortage, Federal Maritime Commission board member Dan Maffei told the committee. 'I do have continuing concern about the auction-like slot allocation procedures – not so much as they are applied right now when transits are not being rationed – but when another lower rainfall period occurs. If we can show that it is interfering with foreign trade of the U.S., there are certain things we can do.' When pressed, Maffei said one of those options is to sanction Panamanian-flag ships. 'The Panamanian flag is one of their major sources of revenue and the number one flag of convenience in the world.' But Maffei also questioned the intense focus on China's influence on the canal when the Chinese-backed company in the region, Hutchison Ports, operates ports in almost every part of the world. 'If owning and managing adjacent ports means that China somehow has operational or strategic control of the Panama Canal, they also have it over the Suez, the Singapore Straits, the Mediterranean Sea and the English Channel,' Maffei asserted. 'We need some sort of overall maritime strategy; we have to acknowledge that this is part of our national security, and that economic resilience is extraordinarily important. I believe that if we start countering some of [China's investment] efforts, we can do it, but it has to be a national priority.' Lawmaker introduces bill to allow purchase of Panama Canal Panama's president rejects Trump's claim of Chinese interference at canal Why the Panama Canal is so important to Trump Click for more FreightWaves articles by John Gallagher. The post Senate debates ways to gain leverage over Panama Canal appeared first on FreightWaves.
Yahoo
28-01-2025
- Business
- Yahoo
Chinese presence in Panama might trigger canal treaty violation, Senate panel told
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.
