Australia and the World Past and Present

Donald Trump says that China runs the Panama Canal.

In his inaugural speech he alleged that “China is operating the Panama Canal. And we didn’t give it to China. We gave it to Panama, and we’re taking it back.”

The US sees that Panama Canal as essential for its security in the Western Hemisphere.

A focus on the canal is unsurprising given trade tensions between the US and China. Both countries are pushing for superpower supremacy.

A whopping 40% of US container trade passes through the canal. That makes the US the country with the greatest amount of goods passing through the waterway. China follows in second place.

Trump’s pressure on Panama seems to have have some effect. Panama has announced that it is withdrawing from China’s Belt and Road initiative.

This news is a blow to China. Panama had been the first Latin American country to sign on to this program. China had hoped that many other Latin American countries would follow suit.

Trump’s concern about Chinese activity in the Canal seems to revolve around port management facilities at either end of the waterway.

Panama Ports Company (PPC) is part of CK Hutchison Holdings – a company based in Hong Kong.

The company is publicly listed.

It is a big player in port management operations worldwide and operates in 24 countries.

When Hong Kong was handed back to mainland China in the late 1990s, the territory was supposed to retain a high degree of autonomy. However much of that autonomy has been whittled away.

China’s national security laws require companies to help the Chinese government in gathering intelligence.

The port management companies in Panama do not control who can move through the Canal.

That is managed by the Panama Canal Authority, which also sets transit fees.

The US handed back control of the Canal to Panama in 1977 after the conclusion of a number of treaties.

Jimmy Carter was president at the time.

Part of Trump’s focus on the canal is about optics and theatrics.

First of all, Carter was a Democrat and Trump is Republican. Trumps wants to play on a narrative that the Democrats are weak and that the US loses ground whenever they are in the White House. Hence Trump’s description of Carter “giving” control away.

In many ways Carter is seen as a rather weak president. Good-natured and warm-hearted – perhaps easily taken for a ride. The obvious case in point was the Iranian hostage crisis. 53 Americans were taken hostage at the US embassy in Tehran in 1979. The Carter administration ummed and ahhed about what to do. After negotiations broke down, Carter authorised military action to rescue the hostages. One of the helicopters crashed into a transport aircraft and eight servicemen died. The hostages were held for 444 days. Carter became a sitting duck president while it was Reagan who would bask in the glow of rescuing the hostages as they were released on the same day as his inauguration.

It was a requirement of the 1977 Treaties that the Panama Canal must remain neutral – in times of peace and in times of war.

There is provision for the US to intervene if there is domestic conflict in Panama or in the case of interference by a foreign power.

Article 5 of the Neutrality Treaty states “after the termination of the Panama Canal Treaty, only the Republic of Panama shall operate the Canal and maintain military forces, defense sites and military installations within its national territory.”

China has been seeking to make diplomatic and trade gains in Latin America, as it has all over the world.

In 2017 Panama ceased its diplomatic recognition of Taiwan in favour of Beijing. Recognition is often followed by investment.

The Trump administration has applied greater pressure on Panama and it seems that it was enough to get the country to withdraw from Belt and Road.