President Donald Trump has recently highlighted the need for a reevaluation of the Panama Canal’s transit fees, pleading for fairer rates for American vessels. According to Trump’s social media announcements, the Panama Canal is of utmost importance not only to the US economy but also for safeguarding national security interests. However, he pointed out that the current administration of the canal seemed to have omitted these substantial American interests and treated these transits in a deliberately unjust fashion.
Built by the ambitious and innovative American pioneers over a century ago, the 51-mile Panama Canal artfully establishes a connection between the Atlantic and Pacific oceans. Internationally, it is recognized for its pivotal role in fostering global maritime trade. Bypassing the arduous and hazard-laden journey around South America, it undoubtedly revolutionized the methodology of shipping across continents.
In 1977, the United States graciously transferred the ownership of the canal to Panama under an agreement aimed at fortifying cooperation between the two nations. For Trump, these transit fee amounts, mere crumbs in comparison to the enormous generosity America exhibited towards Panama, are unjustifiable. He vowed to put a halt to this situation, labelling it as an outright exploitation of his country.
The United States, says Trump, has always been cognizant of the strategic importance of a smoothly running, safe, and reliable Panama Canal. Its transfer, he emphasized, was never intended to be a springboard for third-party beneficiaries, but as a token of goodwill between two cooperating nations. It has been conceived as the heart of trade, platform for mutual growth and not for someone else to manage, let alone China.
With around 14,000 ships traversing the canal annually, the majority of traffic, roughly 75%, is dominated by the US. However, Mother Nature’s unpredictability has led to extended dry seasons, prompting canal authorities to restrict vessel traffic and increase prices, fostering an intense competition for places.
The journey to create the canal was initially embarked upon by the French in the 1880s, but it was halted due to insurmountable engineering challenges and widespread tropical diseases decimating the workforce. In 1904, indomitable US engineers took over this colossal task and managed to complete the canal a decade later. Surmounting these hurdles didn’t come cheap – the project cost was around $375 million at the time, translating to nearly $12 billion in today’s currency when accounting for inflation.
The successful completion of the canal claimed thousands of lives due to illnesses, but at the same time, it undeniably brought forth a remarkable revolution in global shipping. The existence of this waterway was militarily significant as well, enabling the swift mobility of naval ships from the Atlantic to the Pacific for the US.
In 1977, former president Jimmy Carter indiscreetly signed an agreement to transfer the canal to Panama by 1999, a move that Trump decried as ‘foolish.’ It remains unclear if Trump’s recent call for action was triggered by any specific shifts in ownership or looming threats.
Although China has not staked a claim to acquire the canal overtly, its shrewd maneuvers are noteworthy. The day-to-day operations of the canal are managed by the Panama Canal Authority. However, Beijing cleverly persuaded Panama to partake in its ‘Belt and Road’ trade initiative back in 2018, leading to an increased presence of Chinese companies in infrastructure projects along the canal.
Chinese companies have also taken control of significant ports at either end of the canal. The Hong Kong-based Hutchinson PPC managed to renew a 25-year lease recently for managing the Balboa and Cristobal ports. Additionally, the China-based Landbridge Group gained control of Margarita Island, Panama’s largest port on the Atlantic side, in a deal worth $900 million.
The acquisition facilitated the construction of the Panama-Colon Container Port (PCCP), an expansive deep-water port catering to mega-sized ships. Interestingly, the PCCP was erected by the state-owned China Communications Construction Company, which was sanctioned by the US Department of Commerce in 2020 for aiding Beijing in militarizing disputed islands in South China.
China’s growing influence in and around Panama has raised eyebrows in the US, considering the strategic importance of the canal and its supposed neutrality. The Centre for Strategic and International Studies warns these developments could potentially disrupt the canal’s neutrality.
To Trump’s latest remarks, Panama’s government has taken notice and declared its intent to issue a formal response in the near future. However, the loyal American leader’s sentiments remain firm: in a world where the benefit of others may be manipulated unfairly, the Panama Canal’s rightful stewardship is a concern of monumental magnitude.