Issue Position: Foreign Affairs - Panama Canal

Issue Position

The Panama Canal Treaty of 1977 calls for control of the canal zone to be ceded to Panama at the end of 1999 and the termination of the Panama Canal Commission, the U.S. agency which operates the canal. Under the terms of the Treaty on the Permanent Neutrality of the Panama Canal, Panama will have responsibility for operating and defending the Canal after 1999. While the transition for the turnover of the canal has progressed relatively smoothly since 1990, controversy has arisen in recent years.

In July 1996, the Panamanian government awarded a private contract to a Hong Kong company for operation of the ports on both sides of the Panama Canal, Balboa and Cristobal. The Hutchison Port Holdings Company, a subsidiary of the Hutchison Whampoa Group, one of the world's largest terminal operators, will be operating the ports. Concern has been expressed about the bidding process, in which several U.S. companies competed. A number of Senators charged in a letter to the Federal Maritime Commission that there were irregularities in the bidding process that denied U.S. companies an equal opportunity to operate the terminals in Panama. However, a May 1997 Senate Foreign Relations Committee staff report concluded that while the bidding process was unorthodox, no evidence of illegal activity was uncovered.

Concern about the connection between the Hutchison Port Holdings Company and the Chinese government were raised in 1997 press reports. Many expressed fear that China would gain control of the canal and thereby control international commerce and pose a threat to U.S. security interests. Various reports, such as one produced by Senate Foreign Relations Committee staff, indicated Hutchison's operation of the ports does not pose a threat to the operation of the Panama Canal because of the existence of legal safeguards in the Panama Canal Treaties and Panamanian law. Nonetheless, the relationship between the company and the Chinese government cannot be ignored and must continue to be closely monitored.

The security of the U.S. has been placed at risk by the reversion of the Canal to Panamanian control because the Clinton Administration failed to negotiate terms for an on-going military presence in Panama after the reversion of the Canal. Such an agreement would have allowed for the continued presence of a U.S. base for strategic, counter-narcotics, and intelligence-gathering purposes. Nonetheless, the Neutrality Treaty provides allowances for a U.S. military presence in the Canal zone. The Treaty stipulates that both Panama and the United States, in exercising their responsibilities to maintain the regime of neutrality (keeping the Canal secure and open to all nations on equal terms), will each independently have the right to use military force to re-open the Canal or restore its operations should the need arise.

While I do not believe there is an imminent threat to the United States, we must continue to carefully monitor the operations of the Panama Canal.

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