Senate Panama Canal Hearing Probes China’s Growing Influence
- President Trump's concerns about China's influence over the Panama Canal were discussed in a Senate Committee Hearing on Commerce, Science and Transportation, focusing on security issues and foreign control of the vital maritime channel connecting the Atlantic and Pacific Oceans.
President Donald Trump’s recent calls for the U.S. to retake control of the Panama Canal prompted a Senate Committee Hearing on Commerce, Science and Transportation on Tuesday which delved into security issues and foreign influence on the foremost maritime channel connecting the Atlantic and Pacific Oceans.
Though Panama has fiercely denied that China is gaining control over the gateway, which plays a pivotal role in global trade and is responsible for about two-fifths of America’s total cargo traffic, the relationship was a key focus of expert testimony. Committee members also probed the challenges posed by the Canal’s current capacity, which dwindled due to drought last year, and its rising tariffs and fees.
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Senate Commerce Committee Chairman Ted Cruz (R-Tex.) said President Trump has made“a serious and substantive argument” that the Panama Canal Treaty—which turned over control of the Canal to the country of Panama in 1999—“is being violated right now,” pointing to two factors that have contributed to that perspective: “No. 1, the danger of China exploiting or blocking passage through the canal, and, No. 2, the exorbitant costs for transit.”
Chinese firms are currently building a bridge across the Canal that could take nearly a decade to complete, he said. “The partially completed bridge gives China the ability to block the canal without warning, and the ports”—owned by Hong Kong-based CK Hutchison —”give China ready observation posts to time that action,” threatening U.S. national security.
“Meanwhile, the high fees for canal transit disproportionately affect Americans, because U.S. cargo accounts for nearly three quarters of Canal transits,” Cruz added. U.S. Navy vessels pay specific warship fees, while American consumers pay higher costs for goods due to escalating fees for container ships. The Canal brings in more than $3 billion on average each year, a number that exceeds the Panamanian government budget, Cruz said.
Chairman of the Federal Maritime Commission (FMC) Louis E. Sola said “the Canal has been very ably administered by the Panama Canal Authority, a government entity that is separate from the government of Panama” for the past 25 years. But the country’s government has a reputation for being susceptible to corruption and foreign influence.
“Presidential administrations that preceded that of now-President Mulino were particularly receptive to Chinese overtures and beginning in 2015, the People’s Republic of China only had to push lightly on a cracked door in Panama,” he explained. Becoming a member of the Belt and Road Initiative ended Panama’s diplomatic relations with the Republic of China, also known as Taiwan, deepening its ties to Communist China.
“Chinese companies have been able to pursue billions of dollars in development contracts in Panama, many of which were physical infrastructure projects, some on or adjacent to the Panama Canal,” Sola said. “No bid contracts were awarded, labor laws were waived, and the Panamanian people are still waiting to see how they benefited.”
Drought conditions that constricted the Canal’s capacity throughout 2024 also brought on fresh complications, forcing the Panama Canal Authority to slash the number of slots available for transit and prohibit certain classes of vessels from moving through the waterway at all. Without huge infrastructure improvements and enhancements, it’s projected that the Canal’s capacity could fall as much as 50 percent by 2050, severely inhibiting global trade and U.S. commerce, Sola added.
But “The United States is not without options in addressing the growing presence of China and Chinese companies in Panama and throughout the Americas,” he said—”Nor are we without options as they relate to the continued viability of the Canal.”
Firstly, Sola said American companies need more support from the federal government so that Chinese companies aren’t the only contract bidders. “Improving the resiliency of the Panama Canal will require significant engineering and construction work. U.S. firms can and should be at the top of the list of bids considered.”
Having an ambassador in Panama would also protect national interests, he added. There has not been an official U.S. ambassador stationed in the country for five years.
The FMC chairman also said the neutrality of Panama Canal Authority must be protected, and that the U.S. should word to identify opportunities for collaboration, like formalizing a relationship between the Authority and the U.S. Army Corps of Engineers, “which has unparalleled experience in managing large public works projects.”
Following the FMC perspective, Professor Eugene Kontorovich, a legal scholar at George Mason University and senior research fellow at the Heritage Foundation, was asked to explore possible violations of the 1977 Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal.
The agreement guarantees non-discrimination among nations in the right of transit, just and equitable tolls and fees, exclusive operation by Panama and the prohibition of foreign military or defense presence in the country.
China is clearly gaining ground when it comes to presence, having demonstrated a solid interest in establishing operations at the Canal, but there “exists a spectrum of levels of governmental control and influence,” he said. “The treaty is silent on the question of how much is too much,” leaving much subjectivity in assessing China’s influence.
Under international law, states determine for themselves the meaning of their treaty obligations unless a specific resolution mechanism is laid out in text, though both parties have “the responsibility” to “defend the canal against any threat to the regime of neutrality,” the treaty reads.
“The operations of Chinese companies have apparently not compromised traffic through the Canal in any way at this point,” Kontorovich added. “But the treaty is not merely violated when transit through the Canal is obstructed in wartime—indeed, such a treaty would leave the United States with no recourse until it is too late.”
The legal scholar raised concerns about China’s growing influence, but stopped short of saying that the U.S. should retaliate with military force. While the treaty allows for it in the defense of neutrality, that “does not mean this should be the first recourse.”
“Needless to say, any resort to arms should be not taken lightly and should only follow the failure of diplomacy,” he said.
