The Panama Canal is in President Donald Trump’s crosshairs with him pledging in his inaugural address to take it over due to Chinese influence. As a result, Panamanian authorities have initiated an audit of Panama Ports Company. Because any disruption in access to this critical logistics channel would hurt U.S. ag exports, the industry is closely watching the developments.
The Panama Canal has been at the center of controversy since the U.S. turned it over to Panama in 2000 under a treaty signed in 1977.
“An ingredient of that treaty is the canal must be neutral. It can’t prefer one country over the other,” says Mike Steenhoek, executive director, Soy Transportation Coalition. “If that ever was in danger or peril, U.S. military intervention would be justified.”
The Areas in Question
While Trump has called Chinese influence in Panama a national security issue, Steenhoek says the specific issue is their influence at two regional ports.
“Two of the five are actually operated by a Hong Kong-based company called Hutchison Port Holdings,” Steenhoek says. “The company originally received a 25-year concession to operate those two ports: one on the Pacific side and one on the Atlantic side in the late 1990s. Just recently, that 25-year concession came up and was re-extended.”
Trump also claims U.S. ships have been unfairly charged for using the canal. Steenhoek attributes higher freight charges to the drought, which limited service, but also points out the tolls are transparent and governed by the treaty signed with the U.S.
“Part of the treaty made sure it had to be governed on a neutral basis, so one country or one industry didn’t receive preferential treatments,” Steenhoek says. “The tolls are very public and how they’re assessed is based on different types of vessels and different types of tonnage that’s utilizing the canal.”
Meanwhile, Panama’s president has declared Panama’s control of the canal as “non-negotiable.” The ag industry can only hope for a resolution that doesn’t disrupt trade.
Watch this 3-minute video to learn more about the Panama Canal:
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