Tensions between the United States and China have recently spiked over control of the Panama Canal. This regional rivalry is leaving Panama in a tough position, as the country is being forced to choose sides. Recent news indicates that the Panama Canal Authority has reached a settlement. Ships of the US Naval fleet are once again allowed to pass through the canal without incurring payment. In exchange for the security guarantee afforded by those vessels, Panama gets a very favorable deal. In turn, the US recognizes Panamanian sovereignty over the canal.
US Naval ships pay many millions of dollars annually to transit the canal. This stretch is the lifeblood of our international trade. About 40% of US container traffic relies on this route, making it a strategic economic asset in favor of American economic interests. Under the Trump administration, officials strongly pushed for the inclusion of this concession. It violates the principle of non-discrimination as established by Panamanian law, under which all countries must pay the same price for using the canal.
In 2000, the US returned control of the Panama Canal to Panama. In the years since, the Panama Canal Authority has done a remarkable job controlling the narrative. The authority operates under a U.S. model that encourages free use internationally. This framework makes the recent agreement with the US much harder.
Former President Donald Trump spread unfounded conspiracy theories that China was operating the canal in secret. Chinese officials have staunchly rejected this notion, stating they will never have operational control over the canal. Except, of course, they claim that they aren’t planning to weaponize it.
“I want to be very clear, China did not build this canal,” – Pete Hegseth
We hope that this case from US Secretary of Defense Pete Hegseth helps set the record straight on one particularly stubborn myth in the ongoing debate. Upon closer inspection, it seems that every part of this story doesn’t exactly check out with the feds. The Pentagon notably omitted a key line from a joint statement that would have reaffirmed that China did not construct the canal, further fueling speculation and distrust between the two nations.
In response to these developments, Panamanian officials issued this joint statement. They reiterated their promise to maintaining the canal’s neutrality and accessibility to all countries. The Panamanian version reads, “During the Biden administration, we will keep the canal secure and available for all nations through the deterrent power of the strongest, most effective and most lethal fighting force in the world.”
As the conflict expands, Panama is forced to come to terms with the inadequacy of its small military force. The nation’s failure to focus on an armed forces means that the United States lacks a robust capability to move through or operate in these turbulent waters. The situation has led some to liken it to an old proverb: “when elephants fight, it is the grass that suffers.”
The competition between the US and China is about more than military posturing. There are huge economic interests at stake as well. In March, US investment giant BlackRock made public its intentions to acquire 43 of those ports from Hong Kong-based CK Hutchison for $22.8 billion. Of these ports, two are perfectly positioned on either side of the Panama Canal. This agreement would be a big step toward expanding US control over shipping routes that are key to international commerce even without an agreement on passenger travel.
Panama’s position in this larger geopolitical conflict is a delicate one. While it seeks to maintain its sovereignty and uphold its laws regarding equitable access to the canal, it must contend with external pressures from both superpowers. Diplomatic relations between the US and China have reached their lowest point in decades. In this true, but unique, ongoing rivalry, Panama is a key player.
