Senate debates ways to gain leverage over Panama Canal

WASHINGTON — President Donald Trump vowed to “take back” the Panama Canal in his inaugural address, but he likely wouldn’t be able to do so and still be within the confines of the 1977 treaty that signed over authority to Panama, according to an international law expert.

Testifying before the Senate Commerce Committee on Tuesday, Eugene Kontorovich, a senior research fellow at the conservative Heritage Foundation, told lawmakers that countries “need to think long and hard” before signing treaties that effectively give away strategic assets as important as the Panama Canal.

“The U.S. is free to cancel this treaty or withdraw from it at any time, but given that the U.S. has transferred control and sovereignty of the Canal Zone to Panama, the cancellation of the treaty would not necessarily reverse the concession” and return the canal to the U.S., Kontorovich said.

“Now, it is the case that America can take all sorts of measures to insist on neutrality. But a kind of territorial control is not a clear remedy.”

Much of the hearing centered around whether and how much China is effectively controlling freight flows through the canal given that Chinese-backed terminal operators run terminals on both sides of the waterway – a potential violation of the neutrality provided under the current treaty between the U.S. and Panama.

Asked by Sen. Ted Cruz, R-Texas, about the range of remedies available if Panama were found in violation of the treaty, Kontorovich said the use of armed force to enforce the treaty’s provisions – as opposed to taking outright control of the canal itself – is an option.

“Panama agreed that the U.S. could enforce this regime of neutrality by force,” he responded. “Of course, armed force should never be the first recourse for any kind of international dispute and should not be arrived at rashly before negotiations and other kinds of options are exhausted. But it’s quite clear that the treaty contemplates that as a remedy for violations.”

Also discussed during the hearing was the Panama Canal Authority’s practice of giving canal transit times to the highest bidder when water levels in the region are low, which was the case during a water shortage in the region starting in 2023.

“Our concern [was] that the Canal Authority was collecting much more money per transit during the crisis than it had before” the shortage, Federal Maritime Commission board member Dan Maffei told the committee.

“I do have continuing concern about the auction-like slot allocation procedures – not so much as they are applied right now when transits are not being rationed – but when another lower rainfall period occurs. If we can show that it is interfering with foreign trade of the U.S., there are certain things we can do.”

When pressed, Maffei said one of those options is to sanction Panamanian-flag ships. “The Panamanian flag is one of their major sources of revenue and the number one flag of convenience in the world.”

But Maffei also questioned the intense focus on China’s influence on the canal when the Chinese-backed company in the region, Hutchison Ports, operates ports in almost every part of the world.

“If owning and managing adjacent ports means that China somehow has operational or strategic control of the Panama Canal, they also have it over the Suez, the Singapore Straits, the Mediterranean Sea and the English Channel,” Maffei asserted.

“We need some sort of overall maritime strategy; we have to acknowledge that this is part of our national security, and that economic resilience is extraordinarily important. I believe that if we start countering some of [China’s investment] efforts, we can do it, but it has to be a national priority.”