Committee on Freight Policy Examines Panama Canal Operations
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A Senate panel on Jan. 28 took aim at China’s involvement with operations at the Panama Canal and examined President Donald Trump’s economic strategy linked to travel by U.S. ships through the facility.
Republican leadership on the Commerce Committee on freight policy echoed Trump’s concerns specific to China’s role at the canal.
“Even as it takes advantage of the global maritime system, Panama has emerged as a bad actor,” committee Chairman Ted Cruz (R-Texas) said at the hearing, alleging Chinese companies operating at the canal have sometimes been awarded contracts without fair competition. “In the last two years, the canal authority generated record revenue even while transits were depressed by drought conditions, and the only comfort to delayed and overcharged ships is that Panama may invest in more freshwater reserves in the future.”
Cruz
At issue is the Neutrality Treaty — signed by former President Jimmy Carter in 1977 — which directs the canal to show no favoritism to ships passing through. Cruz and fellow Republicans questioned Panama’s adherence to the agreement. Cruz alleged the treaty is being violated due to the “danger of China exploiting or blocking passage through the canal and the exorbitant costs for transit.”
Chinese state-owned enterprises operate in the ports of Balboa and Cristobal, which are located at each end of the canal. A subsidiary of Hong Kong-based CK Hutchison Holdings has operations there.
Sen. Marsha Blackburn (R-Tenn.) observed, “We are hearing that the toll structure disadvantages U.S. companies, that the [Panama] Canal Authority has begun charging millions of dollars to skip the queue, and these fees put many bulk shippers in an adverse position.”
According to the Panama Canal Authority, its toll structure is based on criteria such as a fixed rate according to vessel size and lock used. In fiscal 2024, China ranked second behind the United States in the canal’s top 15 countries by origin and destination of cargo, per the authority.
The Federal Maritime Commission confirmed that more than 40% of U.S. container traffic, valued at roughly $270 billion per year, transit the canal.
Trump
Trump has expressed interest in reclaiming the canal, which the United States turned over to Panama in 1999. Legislative efforts reflecting Trump’s policies have been introduced in the Republican-led Congress. Sen. Eric Schmitt (R-Mo.), a Commerce Committee member, is co-lead sponsor of a resolution calling on Panama to expel officials and interest of the People’s Republic of China as well as to terminate Chinese management of the aforementioned ports.
On the House side, Rep. Dusty Johnson (R-S.D.) introduced legislation that would authorize the purchase of the Panama Canal. Johnson, a member of the Transportation and Infrastructure Committee, explained: “China’s interest in and presence around the canal is a cause for concern. America must project strength abroad — owning and operating the Panama Canal might be an important step towards a stronger America and a more secure globe.”
Cantwell
Sen. Maria Cantwell (D-Wash.), the Commerce Committee panel’s ranking member, pledged to review concerns associated with the canal, meet with the U.S. Coast Guard and the Department of Defense, and set a potential field hearing there this spring.
“The Panama Canal is vital to America’s supply chains, lowering costs of consumer goods and our national security,” Cantwell said. “It’s critical that the United States and Panama work cooperatively on new cybersecurity measures to close backdoors to foreign adversaries. The United States and Panama should also work together to boost port and canal infrastructure to lower costs and ensure reliability of the canal.”
The Council on Foreign Relations determined there is no evidence the Chinese government controls the canal. Foreign Ministry of China spokesperson Mao Ning said, “China will as always respect Panama’s sovereignty over the canal and recognize the canal as a permanently neutral international waterway. We believe the canal will continue to make new contributions to facilitating integration and exchanges between people of different countries and enhancing humanity’s well-being.”
A tanker transits through the Panamax locks of the Panama Canal. (Panama Canal Authority)
Addressing the committee at the hearing, FMC Chairman Louis Sola told senators, “We must protect the independence of the Panama Canal Authority. Any effort by other interests in Panama to diminish the independence or professionalism of the authority must be stopped. Building or expanding relationships with the Panama Canal Authority can increase its capabilities and competencies even further.”
Morales
The authority manages the canal’s operations. Its leadership repeatedly emphasizes its role as an honest and transparent custodian of international economic stability. Panama Canal Administrator Ricaurte Vásquez Morales, at a recent ceremony marking the 25th anniversary of the canal’s transfer to the Panamanian administration, said, “We have worked under a common objective: to guarantee a safe and continuous operation of the canal for the world. First, we demonstrated the capacity of Panamanians to manage it; then, we reaffirmed our commitment to the expansion and construction of the third set of locks. We could not be left behind.”
Responding to comments Trump made in his Jan. 20 inaugural address about reclaiming the canal, Panama President José Raúl Mulino said he “must categorically reject the remarks made by President Donald Trump regarding Panama and its canal during his inaugural address."
" ... The canal was not a concession from anyone,” Mulino said. “It is the result of generational struggles that culminated in 1999 through the [Omar] Torrijos-Carter Treaty. For the past 25 uninterrupted years, we have administered and expanded it responsibly to serve the world and its commerce, including the United States.”
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