Trump’s Deal Is The First Step In Countering China In Panama

After meeting with U.S. Secretary of State Marco Rubio, Panamanian President José Raúl Mulino announced that Panama will back out of the China-funded global infrastructure program. This decision is a notable victory for the Trump administration, but more action is needed to address China’s influence over the Panama Canal.

The United States constructed the Panama Canal in the early 20th century, later returning control to Panama through a treaty signed by former President Jimmy Carter in 1977. The Canal remains vital for U.S. economic and strategic interests. According to the Center for Strategic and International Studies (CSIS), the Panama Canal is “a major gateway between the Atlantic and Pacific Oceans and a provider of lower shipping costs for U.S. and global trade.” Importantly, more than 60 percent of the goods that pass through the Canal either originate in or are destined for U.S. markets, making equal access essential for U.S. national security and economic well-being.

Over the years, China has emerged as the second-largest user of the Panama Canal, regarding it as a key entry point for exerting its economic, diplomatic, and political influence throughout Latin America. The last three decades have seen an increase in China’s economic endeavors in Panama.

Since 1997, when Beijing took control of Hong Kong, Hutchison Ports, a subsidiary of Hong Kong-based CK Hutchison Holdings, has been operating the Balboa and Cristobal ports on the Panama Canal. In 2022, the Panamanian government extended Hutchison’s lease for these ports for an additional 25 years.

During Trump’s first term, China’s economic and political influence in Panama grew significantly. In 2016, Landbridge Group, a prominent Chinese firm, made headlines by acquiring control of Margarita Island, the largest port on the canal’s Atlantic side, for a staggering $900 million. Following this move, Landbridge established a subsidiary named Panama Colon Container Port Inc. (PCCP), partnering with China Communications Construction Company (CCCC) and the China Harbor Engineering Company (CHEC) to develop a deep-water port specifically designed for mega-ships.

A year later, following Beijing’s intense campaign to politically isolate Taiwan, Panama abruptly terminated its long-standing diplomatic relationship with Taiwan. The Panamanian government claimed this decision was made to uphold the “One China” policy, asserting that Taiwan is part of China. Shortly thereafter, Panama became the first country in Latin America to sign a cooperation agreement under China’s “One Belt and One Road” (OBOR) infrastructure initiative. OBOR is more than a China-funded global infrastructure project; it represents China’s strategic maneuvering to expand access to critical locations and resources around the world, while simultaneously creating a robust market for Chinese exports.

China’s commitment to Panama is evident, especially following the visit of Communist Party Secretary Xi Jinping in 2018. Since that visit, Chinese involvement in and around the Panama Canal has surged. The Panamanian government awarded a substantial $1.4 billion contract to a Chinese consortium for the construction of a bridge over the Panama Canal. Furthermore, the China State Construction Engineering Corporation (CSCEC) was granted a $193 million contract to build the Amador Convention Center, strategically located near the Panama Canal estuary that opens to the Pacific Ocean. In the same year, China’s Shanghai Gorgeous Group initiated the construction of a natural gas-fired power plant at the Atlantic exit of the Panama Canal.

Huawei, China’s telecom giant with Chinese military connections, has established a regional hub within the Panama Canal’s Colón Free Trade Zone and has installed its “Safe City Technology” (SCT) in the area. This invasive surveillance system includes facial recognition cameras, enabling China to monitor activities in and around the Panama Canal.

According to a U.S. Congressional report, Panama has received $2.5 billion in investments from China since 2005, making it the largest recipient of Chinese investment in Latin America as of 2022. China’s escalating involvement in the Panama Canal is a serious issue that demands attention from the United States to safeguard its vital interests in this strategically crucial region.

According to the Neutrality Treaty signed between Panama and the United States in 1977, only Panama is allowed to operate the Canal and station military forces to ensure “fair access for all nations and nondiscriminatory tolls.” The treaty also stipulates that the United States can use its military to defend the Panama Canal against any threats to its neutrality, thus ensuring perpetual U.S. access to the Canal.

President Trump has identified China’s growing influence in the Panama Canal as a national security risk and a violation of the Neutrality Treaty. As a result, he has not ruled out the possibility of using military force to regain control of the Panama Canal.

Secretary of State Marco Rubio’s choice to visit Panama as his first stop powerfully signals the Trump administration’s resolve to combat China’s growing influence in the Western Hemisphere. Rubio reportedly warned Panama’s president that, “Absent immediate changes, it would require the United States to take measures necessary to protect its rights under the treaty.”

Rubio’s warning had a significant impact. President Mulino of Panama immediately announced that his country wouldn’t renew its 2017 agreement to participate in China’s infrastructure program. Mulino further revealed that his government has initiated audits of Hutchison, the Hong Kong-based company managing two ports within the Panama Canal.

Mulino’s announcement marks a foreign policy victory for the Trump administration. After four years of Biden administration’s foreign policy failures, a win is refreshing. Still, Mulino’s concession does not address ongoing concerns about China’s extensive influence over the Panama Canal through various infrastructure projects that Chinese companies have built and continue to operate. It probably explained why instead of taking a victory lap, Trump reiterated “We’re taking it back, or something very powerful is going to happen.”

It will be interesting to see what decisive measures he plans to take to counter China’s influence and ensure the Panama Canal’s neutrality.