US Senators Examine China's Influence Over Panama Canal

US senators heard sharply different analyses about Chinese influence over the Panama Canal on Wednesday, with some experts suggesting solutions ranging from enhanced trade partnerships to military intervention to regain control of the strategic waterway.

The hearing before the Senate Commerce, Science and Transportation Committee attempted to examine President Donald Trump’s claims that China has gained undue control over the canal, which the US transferred to Panama in 1999 under terms of a 1977 treaty.

Trump has contended that Panama’s authorisation of increased Chinese commercial activity violates the canal's neutrality agreement.

''We gave it [the canal] to Panama, not China, and we're taking it back,'' Trump declared in his inauguration address, alleging treaty breaches to support a potential intervention.

But China's direct involvement remains a matter of debate. In 2018, a Chinese state-owned enterprise – China Harbour Engineering Company – secured a US$1.4 billion contract to construct the canal's fourth bridge.

US lawmakers have raised concerns about Hutchison Port Holdings, a Hong Kong-based private company operating the Balboa and Cristobal ports at the canal’s Atlantic and Pacific entrances. The firm received a 25-year operating extension in 2021.

Hutchison is not involved in managing the canal itself. But Senator Ted Cruz, the Texas Republican who is the committee’s chair, said that the company’s mere presence in ports near the Atlantic and Pacific access routes could constitute a violation of the 1977 treaty’s neutrality clause.

Cruz said that Article Five of the treaty ''limits any foreign control'', and speculated that as the Communist Party advanced ''its global economic contest'' against Washington, it might develop a ''militaristic interest in the canal''.

Eugene Kontorovich, a senior research fellow at the conservative Heritage Foundation, testified that while determining a treaty violation ''is a mixed question of law and fact”, either party can decide if terms have been breached.

''It was clear that the treaty was understood as giving both sides separately the right to resort to use armed force to enforce its provisions''.

Unlike typical international agreements requiring third-party arbitration, Kontorovich said, the Panama Canal treaty grants both parties independent authority to assess violations of its neutrality.

Thus, under Article Five, ''we can decide that the neutrality regime is being threatened and then act with whatever is necessary to maintain the neutral channel unilaterally,'' Kontorovich said, suggesting possible military measures.

Whether the operations of a Hong Kong company would constitute a violation of the principle of neutrality, he acknowledged, ''is a mixed question of law''.

"If the Chinese government was involved in procuring these contracts, although it strongly provides sort of additional support for the notion that these companies are serving some kind of governmental interest, it wouldn't be a violation,'' he said.

Louis Sola, chairman of the Federal Maritime Commission, told the committee that ''American companies should play a leading role in enhancing the canal's infrastructure by supporting US firms".

But asked by Senator Andy Kim, Democrat of New Jersey, about potential blockades by Hutchison Ports or the Chinese government, Sola said he had no evidence of interference.

Instead, he noted that the treaty transferred ''not just the canal, but all the land and water around it'', including port facilities.

Thus, Sola contended, Hutchison's port operations at both canal entrances theoretically enabled the company to ''block traffic'' if desired.

Kim rejected calls for US intervention, saying that aggressive rhetoric could undermine the Panama Canal Authority’s independence.

Kim challenged the Republican stance, arguing that their suggestions of treaty violations and military intervention could damage US-Panama relations and wind up boosting Chinese influence in Central America.

''We try to have nuance and precision with words that we use,'' Kim said. ''Otherwise, it very much looks like some of what we talk about is going to be perceived as undermining the Panama Canal Authority.''

Senator Maria Cantwell of Washington, the committee's senior Democrat, said she was ''deeply concerned'' about China's growing sway over critical infrastructure in Latin America and called for senators to travel to Panama to verify Trump's claims.

She also argued that any Chinese influence needed to be countered by modernising free trade agreements and an ''aggressive strategy'' of infrastructure investment.