President Trump has been threatening to "take back" the Panama Canal since he regained power. In this episode, listen to testimony from officials serving on the Federal Maritime Commission who explain why the Panama Canal has become a focus of the administration and examine whether or not we need to be concerned about an impending war for control of the canal. View the show notes on the Congressional Dish website at https://congressionaldish.com/cd312-threatening-panamas-canal/ Please Support Congressional Dish – Quick Links Contribute monthly or a lump sum via PayPal Support Congressional Dish via Patreon (donations per episode) Send Zelle payments to: [email protected] Send Venmo payments to: @Jennifer-Briney Send Cash App payments to: $CongressionalDish or [email protected] Use your bank's online bill pay function to mail contributions to: 5753 Hwy 85 North, Number 4576, Crestview, FL 32536. Please make checks payable to Congressional Dish Thank you for supporting truly independent media! Background Sources Recommended Congressional Dish Episodes CD292: Sabotaging Palestine CD287: War Money Current Events around the Panama Canal "Panama president calls Trump's talk of 'reclaiming' the Panama Canal a lie." March 5, 2025. the Associated Press. "Blackrock to buy Hong Kong firm's Panama Canal port stake amid Trump pressure." Sabrina Valle, Suzanne McGee, and Michael Martina. March 4, 2025. Reuters. "Mapping China's Influence around the Panama Canal." Matt Murphy, Jake Horton and Erwan Rivault. February 14, 2025. BBC. "Low water levels in Panama Canal due to increasing demand exacerbated by El Nino event." May 1, 2024. World Weather Attribution. "59 Iran-Linked Ships Stripped of Panamanian Flag, US DOS Confirms." World Maritime News Staff. March 15, 2019. World Maritime News. "Chinese Consortium to Build Fourth Panama Canal Bridge." July 29, 2018. Reuters. Panama Canal Treaty of 1977 "Panama Canal Treaty of 1977." U.S. Department of State. The Chinese "Belt and Road Initiative" "Belt and Road Initiative." Michele Ruta. March 29, 2018. World Bank Group. The Trump-Gaza Video Donald Trump shares 'what's next' for Gaza AI video on his Truth Social Platform February 26, 2025. Sky News. Laws Section 19 of the Merchant Marine Act Audio Sources President Trump Threatens to "Reclaim" The Panama Canal during his March 4, 2025 Presidential Address Examining the Panama Canal and Its Impact on U.S. Trade and National Security Senate Committee on Commerce, Science, and Transportation January 28, 2025 Watch on YouTube Witnesses: Louis E. Sola, Chairman, Federal Maritime Commission (FMC) Daniel B. Maffei, Commissioner, FMC Eugene Kontorovich, Professor, Scalia Law School, George Mason University Joseph Kramek, President & CEO, World Shipping Council Clips 17:30 Sen. Ted Cruz (R-TX): Between the American construction of the Panama Canal, the French effort to build an isthmus canal, and America's triumphant completion of that canal, the major infrastructure projects across Panama cost more than 35,000 lives. For the final decade of work on the Panama Canal, the United States spent nearly $400 million, equivalent to more than $15 billion today. The Panama Canal proved a truly invaluable asset, sparing both cargo ships and warships the long journey around South America. When President Carter gave it away to Panama, Americans were puzzled, confused, and many outraged. With the passage of time, many have lost sight of the canal's importance, both to national security and to the US economy. 18:45 Sen. Ted Cruz (R-TX): But the Panama Canal was not just given away. President Carter struck a bargain. He made a treaty. And President Trump is making a serious and substantive argument that that treaty is being violated right now. 19:10 Sen. Ted Cruz (R-TX): President Trump has highlighted two key issues. Number one, the danger of China exploiting or blocking passage through the canal, and number two, the exorbitant costs for transit. 19:20 Sen. Ted Cruz (R-TX): Chinese companies are right now building a bridge across the canal at a slow pace, so as to take nearly a decade. And Chinese companies control container points ports at either end. The partially completed bridge gives China the ability to block the canal without warning, and the ports give China ready observation posts to time that action. This situation, I believe, poses acute risks to US national security. 19:50 Sen. Ted Cruz (R-TX): Meanwhile, the high fees for canal transit disproportionately affect Americans, because US cargo accounts for nearly three quarters of Canal transits. US Navy vessels pay additional fees that apply only to warships. Canal profits regularly exceed $3 billion. This money comes from both American taxpayers and consumers in the form of higher costs for goods. American tourists aboard cruises, particularly those in the Caribbean Sea, are essentially captive to any fees Panama chooses to levy for canal transits, and they have paid unfair prices for fuel bunkering at terminals in Panama as a result of government granted monopoly. Panama's government relies on these exploitative fees. Nearly 1/10 of its budget is paid for with canal profit. 21:25 Sen. Ted Cruz (R-TX): Panama has for years flagged dozens of vessels in the Iranian ghost fleet, which brought Iran tens of billions of dollars in oil profits to fund terror across the world. 21:40 Sen. Ted Cruz (R-TX): And Chinese companies have won contracts, often without fair competition, as the infamous Belt and Road Initiative has come to Panama. China often engages in debt trap diplomacy to enable economic and political coercion. In Panama, it also seems to have exploited simple corruption. 32:40 Louis Sola: The Panama Canal is managed by the Panama Canal Authority, ACP, an independent agency of the Panamanian government. The ACP is a model of public infrastructure management, and its independence has been key to ensure a safe and reliable transit of vessels critical to the US and global commerce. 33:25 Louis Sola: In contrast, the broader maritime sector in Panama, including the nation's ports, water rights, and the world's largest ship registry, falls under the direct purview of the Panamanian government. 33:35 Louis Sola: Unfortunately, this sector has faced persistent challenges, including corruption scandals and foreign influence, particularly from Brazil and China. These issues create friction with the ACP, especially as it works to address long term challenges such as securing adequate water supplies for the canal. 33:55 Louis Sola: Although the ACP operates independently, under US law both the ACP and the government of Panama's maritime sector are considered one in the same. This means that any challenges in Panama's maritime sector, including corruption, lack of transparency, or foreign influence, can have a direct or indirect impact on the operations and long term stability of the canal. This legal perspective highlights the need for diligence in monitoring both the ACP's management and Panama government's policies affecting maritime operations. 34:30 Louis Sola: Since 2015, Chinese companies have increased their presence and influence throughout Panama. Panama became a member of the Belt and Road Initiative and ended its diplomatic relations with Taiwan. Chinese companies have been able to pursue billions of dollars in development contracts in Panama, many of which were projects directly on or adjacent to the Panama Canal. Many were no bid contracts. Labor laws were waived, and the Panamanian people are still waiting to see how they've been benefited. It is all more concerning that many of these companies are state-owned, and in some cases, even designated as linked to the People's Liberation Army. We must address the significant growing presence and influence of China throughout the Americas and in Panama, specifically. 35:20 Louis Sola: American companies should play a leading role in enhancing the canal's infrastructure. By supporting US firms, we reduce reliance on Chinese contractors and promote fair competition. 36:55 Daniel Maffei: Because the canal is essentially a waterway bridge over mountainous terrain above sea level, it does depend on large supplies of fresh water to maintain the full operations. Panama has among the world's largest annual rainfalls. Nonetheless, insufficient fresh water levels have occurred before in the canal's history, such as in the 1930s when the Madden Dam and Lake Alajuela were built to address water shortages. Since that time, the canal has undertaken several projects to accommodate larger, more modern ships. In the last couple of years, a trend of worsening droughts in the region, once again, has forced limits to the operations of the canal. Starting in June of 2023 the Panama Canal Authority employed draft restrictions and reduced the number of ships allowed to transit the canal per day. Now the Panama Canal limitations, in combination with the de facto closure of the Suez Canal to container traffic, has had serious consequences for ocean commerce, increasing rates, fees and transit times. 39:30 Daniel Maffei: Now, fortunately, Panama's 2024 rainy season has, for now, alleviated the most acute water supply issues at the canal, and normal transit volumes have been restored. That said, while the Panamanian government and Canal Authority have, with the advice of the US Army Corps of Engineers, developed credible plans to mitigate future water shortages, they also warned that it is likely that at least one more period of reduced transits will occur before these plans can be fully implemented. 41:55 Eugene Kontorovich: We shall see that under international law, each party to the treaty is entitled to determine for itself whether a violation has occurred. Now, in exchange for the United States ceding control of the canal which it built and maintained, Panama agreed to a special regime of neutrality. The essential features of this regime of neutrality is that the canal must be open to all nations for transit. That's Article Two. Equitable tolls and fees, Article Three. An exclusive Panamanian operation, Article Five. The prohibition of any foreign military presence, Article Five. Article Five provides that only Panama shall operate the canal. Testifying about the meaning of the treaty at the Senate ratification hearings, the Carter administration emphasized that this prohibits foreign operation of the canal, as well as the garrisoning of foreign troops. Now, Article Five appears to be primarily concerned about control by foreign sovereigns. If Panama signed a treaty with the People's Republic of China, whereby the latter would operate the canal on Panama's behalf, this would be a clear violation. But what if Panama contracted for port operations with a Chinese state firm, or even a private firm influenced or controlled in part by the Chinese government? The Suez Canal Company was itself, before being nationalized, a private firm in which the United Kingdom was only a controlling shareholder. Yet this was understood to represent British control over the canal. In other words, a company need not be owned by the government to be in part controlled by the government. So the real question is the degree of de jure or de facto control over a Foreign Sovereign company, and scenarios range from government companies in an authoritarian regime, completely controlled, to purely private firms in our open society like the United States, but there's many possible situations in the middle. The treaty is silent on the question of how much control is too much, and as we'll see, this is one of the many questions committed to the judgment and discretion of each party. Now turning to foreign security forces, the presence of third country troops would manifestly violate Article Five. But this does not mean that anything short of a People's Liberation Army base flying a red flag is permissible. The presence of foreign security forces could violate the regime of neutrality, even if they're not represented in organized and open military formations. Modern warfare has seen belligerent powers seek to evade international legal limitations by disguising their actions in civilian garb, from Russia's notorious little green men to Hamas terrorists hiding in hospitals or disguised as journalists. Bad actors seek to exploit the fact that international treaties focus on sovereign actors. Many of China's man made islands in the South China Sea began as civilian projects before being suddenly militarized. Indeed, this issue was discussed in the Senate ratification hearings over the treaty. Dean Rusk said informal forces would be prohibited under the treaty. Thus the ostensible civilian character of the Chinese presence around the canal does not, in itself, mean that it could not represent a violation of the treaty if, for example, these companies and their employees involved Chinese covert agents or other agents of the Chinese security forces. So this leads us to the final question, Who determines whether neutrality is being threatened or compromised? Unlike many other treaties that provide for third party dispute resolution, the neutrality treaty has no such provision. Instead, the treaty makes clear that each party determines for itself the existence of a violation. Article Four provides that each party is separately authorized to maintain the regime of neutrality, making a separate obligation of each party. The Senate's understanding accompanying to ratification also made clear that Article Five allows each party to take, quote, "unilateral action." Senator Jacob Javits, at the markup hearing, said that while the word unilateral is abrasive, we can quote, "decide that the regime of neutrality is being threatened and then act with whatever means are necessary to keep the canal neutral unilaterally." 46:35 Joseph Kramek: My name is Joe Kramek. I'm President and CEO of the World Shipping Council. The World Shipping Council is the global voice of liner shipping. Our membership consists of 90% of the world's liner shipping tonnage, which are container vessels and vehicle carriers. They operate on fixed schedules to provide our customers with regular service to ship their goods in ports throughout the world. 47:15 Joseph Kramek: As you have heard, using the Panama Canal to transit between the Atlantic and Pacific saves significant time and money. A typical voyage from Asia to the US or East Coast can be made in under 30 days using the canal, while the same journey can take up to 40 days if carriers must take alternate routes. From a commercial trade perspective, the big picture is this. One of the world's busiest trade lanes is the Trans Pacific. The Trans Pacific is cargo coming from and going to Asia via the United States. Focusing in a bit, cargo coming from Asia and bound for US Gulf and East Coast ports always transits the Panama Canal. Similarly, cargo being exported from US and East Coast ports, a large share of which are US Agricultural exports, like soybeans, corn, cotton, livestock and dairy also almost always transits the Panama Canal. The result is that 75% of Canal traffic originates in or is bound for the United States. 48:55 Joseph Kramek: We've talked about the drought in 2023 and the historic low water levels that it caused in Lake Gatún, which feeds the canal locks, a unique system that is a fresh water feed, as contrasted to an ocean to ocean system, which the French tried and failed, but which is actually active in the Suez Canal. These low water levels reduced transits from 36 transits a day to as low as 22 per day. Additionally, the low water levels required a reduction in maximum allowable draft levels, or the depth of the ship below the water line, which for our members reduced the amount of containers they could carry through the canal. This resulted in a 10% reduction in import volumes for US Gulf and East Coast ports, with the Port of Houston experiencing a 26.7% reduction. 51:10 Sen. Ted Cruz (R-TX): Are you aware of allegations from some vessel operators of disparate treatment such as sweetheart deals or favorable rebates by Panama for canal transits? Louis Sola: Thank you for the question, Mr. Chairman, we have become aware through some complaints by cruise lines that said that they were not getting a refund of their canal tolls. When we looked into this, we found a Panamanian Executive Order, Decree 73, that specifically says that if a cruise line would stop at a certain port, that they could be refunded 100% of the fees. And as far as I know, that's the only instant where that exists. 53:05 Sen. Ted Cruz (R-TX): So Panama was the very first Latin American country to join China's Belt and Road Initiative, and right now, China is building a fourth bridge across the Panama Canal for car traffic and light rail. Chairman Sola, why should Chinese construction of a bridge near Panama City concern the United States? Louis Sola: Mr. Chairman, we all saw the tragedy that happened here in the Francis Scott Key Bridge incident and the devastation that had happened to Baltimore. We also saw recently what happened in the Suez Canal, where we had a ship get stuck in there. It's not only the construction of the bridge, but it's a removal of a bridge, as I understand it, called the Bridge of the Americas. It was built in 1961 and that would paralyze cargo traffic in and out of the canals. 53:55 Sen. Ted Cruz (R-TX): Panama also recently renewed the concessions for two container ports to a Chinese company, Hutchison Ports PPC. Of course, Chinese companies are controlled by the Communist Party. How does China use control of those ports for economic gain? Louis Sola: Mr. Chairman, I am a regulator, a competition regulator. And the Chinese ports that you're referring to, let me put them into scope. The one on the Pacific, the Port of Balboa, is roughly the same size as the Port of Houston. They do about 4 million containers a year. They have about 28 game tree cranes. The one on the Atlantic is the same as my hometown in Miami, they do about 1 million containers. So where Roger Gunther in the Port of Houston generates about $1 billion a year and Heidi Webb in Miami does about $200 million, the Panama ports company paid 0 for 20 years on that concession. So it's really hard to compete against zero. So I think that's our concern, our economic concern, that we would have. Sen. Ted Cruz (R-TX): Commissioner Maffei, anything to add on that? Daniel Maffei: Yeah, I do too also think it is important. I would point out that you don't have to stop at either port. It's not like these two ports control the entrance to the canal. That is the Canal Authority that does control that. However, I think it's of concern. I would also point out that the Panamanian government thinks it's of concern too, because they're conducting their own audit of those particular deals, but we remain very interested as well. 56:25 Sen. Ted Cruz (R-TX): Would the facts discussed here be considered violations of the neutrality treaty in force right now between the United States and Panama? Eugene Kontorovich: So I think Senator, I think potentially they could, but it's impossible to say definitively without knowing more, in particular, about the degree of Chinese control and involvement in these companies. I think it's important to note that these port operation companies that operate the ports on both sides, when they received their first contract, it was just a few months before Hong Kong was handed over to China. In other words, they received them as British companies, sort of very oddly, just a few months before the handover. Now, of course, since then, Hong Kong has been incorporated into China, has been placed under a special national security regime, and the independence of those companies has been greatly abridged, to say nothing of state owned companies involved elsewhere in in the canal area, which raised significantly greater questions. Additionally, I should point out that the understandings between President Carter and Panamanian leader Herrera, which were attached to the treaty and form part of the treaty, provide that the United States can, quote, "defend the canal against any threat to the regime of neutrality," and I understand that as providing some degree of preemptive authority to intervene. One need not wait until the canal is actually closed by some act of sabotage or aggression, which, as we heard from the testimony, would be devastating to the United States, but there is some incipient ability to address potential violations. 58:10 Sen. Ted Cruz (R-TX): If the United States determines that Panama is in violation of the treaty, what is the range of remedies the United States would have for that treaty violation? Eugene Kontorovich: So I think it may be shocking to people to hear today, but when one goes over the ratification history and the debates and discussions in this body over this treaty, it was clear that the treaty was understood as giving both sides, separately, the right to resort to use armed force to enforce the provisions of the treaty. And it's not so surprising when one understands that the United States made an extraordinary concession to Panama by transferring this canal, which the United States built at great expense and maintained and operated to Panama, gratis. And in exchange, it received a kind of limitation, a permanent limitation on Panamanians sovereignty, that Panama agreed that the United States could enforce this regime of neutrality by force. Now, of course, armed force should never be the first recourse for any kind of international dispute and should not be arrived at sort of rationally or before negotiations and other kinds of good offices are exhausted, but it's quite clear that the treaty contemplates that as a remedy for violations. 1:03:20 Louis Sola: I believe that the security of the canal has always been understood to be provided by the United States. Panama does not have a military, and I always believed that there's been a close relationship with Southern Command that we would provide that. And it would be nice to see if we had a formalization of that in one way or another, because I don't believe that it's in the treaty at all. 1:05:05 Daniel Maffei: While we were down there, both of us heard, I think, several times, that the Panamanians would, the ones we talked to anyway, would welcome US companies coming in and doing a lot of this work. Frankly, their bids are not competitive with the Chinese bids. Frankly, they're not that existent because US companies can make more money doing things other places, but even if they were existent, it is difficult to put competitive bids when the Chinese bids are so heavily subsidized by China. 1:06:10 Sen. Ted Cruz (R-TX): What would China's incentive be to heavily subsidize those bids to undercut American companies and other companies? Daniel Maffei: Yeah, it's not a real short answer, but Senator, China's made no secret of its ambitious policies to gain influence of ports throughout the globe. It's invested in 129 ports in dozens of countries. It runs a majority of 17 ports, that does not include this Hong Kong company, right? So that's just directly Chinese-owned ports. So it has been a part of their Belt and Road strategy, whatever you want to call it, the Maritime Silk Road, for decades. So they believe that this influence, this investment in owning maritime ports is important to their economy. 1:07:05 Sen. Deb Fischer (R-NE): In 2021, Hutchison was awarded those two ports, Port Balboa and Port Cristobal, in a no-bid award process. Can you tell me, does the United States have any authority or recourse with the Panama Canal Authority under our current agreement with Panama to rebid those terminal concession contracts. And perhaps Mr. Kantorovich, that's more in your purview? Louis Sola: Senator, both of those ports were redone for 25 years, until 2047, I believe. And they have to pay $7 million is what the ongoing rate is for the Port of Houston- and the Port of Miami-sized concessions. Sen. Deb Fischer (R-NE): And it can't be rebid until after that date? Louis Sola: Well, I believe that that's what the comptroller's office is auditing both of those ports and that contract. That was done under the previous Panamanian administration. A new administration came in, and they called for an audit of that contract immediately. 1:20:10 Sen. Dan Sullivan (R-AK): Are the companies now controlling both sides of the Panama Canal, the Chinese companies, subject to the PRC national security laws that mandate cooperation with the military, with state intelligence agencies. Does anyone know that? Eugene Kontorovich: They're subject all the time. They're subject to those laws all the time by virtue of being Hong Kong companies. And you know, they face, of course, consequences for not complying with the wishes of the Chinese government. One of the arguments -- Sen. Dan Sullivan (R-AK): Wouldn't that be a violation of the treaty? And isn't that a huge risk to us right now that the Chinese -- Eugene Kontorovich: That is a threat to the neutrality -- Sen. Dan Sullivan (R-AK): If they invaded Taiwan, invaded the Philippines, they could go to these two companies saying, Hey, shut it down, make it hard, sink a ship in the canal. And wouldn't they be obligated to do that under Chinese law if they were ordered to by the PLA or the CCP? Eugene Kontorovich: I don't know if they'd be obligated, but certainly the People's Republic of China would have many tools of leverage and pressure on these companies. That's why the treaty specifically says that we can act not just to end actual obstructions to the canal. We don't have to wait until the canal is closed by hostile military action. Thatwould be a suicide pact, that would be catastrophic for us, but rather that we can respond at the inchoate, incipient level to threats, and then this is up to the president to determine whether this is significantly robust to constitute -- Sen. Dan Sullivan (R-AK): So aren't we kind of walking up to the idea of a suicide pact, because we've got two big Chinese companies on both ends of the Panama Canal, who, if there's a war in INDOPACOM, Taiwan that involves us and China, these companies would be obligated to do the bidding of the Chinese Communist Party and PLA? I mean, are we kind of walking up to a very significant national security threat already? Eugene Kontorovich: Yeah, certainly, there's a threat. And I think what makes the action of the Chinese government so difficult to respond to, but important to respond to, is that they conceal this in sort of levels of gray without direct control. Sen. Dan Sullivan (R-AK): Let me ask you on that topic, as my last question, Professor, let's assume that we find out. And again, it wouldn't be surprising. I think you can almost assume it that these two companies have Chinese spies or military officials within the ranks of the employees of the companies. Let's assume we found that out, somehow that becomes public. But I don't think it's a big assumption. It's probably true right now. So you have spies and military personnel within the ranks of these two companies that are controlling both ends of the Panama Canal for you, Professor, and Chairman Sola, wouldn't that be a blatant violation of Article Five of the neutrality treaty, if that were true, which probably is true? Eugene Kontorovich: Yeah, I do think it would be a clear violation. As former Secretary of State, Dean Ross said at the ratification hearings, informal forces can violate Article Five as well as formal forces. Sen. Dan Sullivan (R-AK): Is there any evidence of Chinese spies or other nefarious Chinese actors embedded in these companies? Louis Sola: Senator, we have no information of that. That's not under the purview of -- Sen. Dan Sullivan (R-AK): But you agree that would be a violation of Article Five of the neutrality treaty? Louis Sola: I do. 1:26:25 Daniel Maffei: Senator Sullivan was talking about Hutchison Ports. That's actually the same company that runs terminals on both ends of the canal. I am concerned about that. However, if we want to be concerned about that, all of us should lose a lot more sleep than we're losing because if there are spies there, then there might be spies at other Hutchinson ports, and there are other Hutchinson ports in almost every part of the world. They own the largest container port in the United Kingdom, Felix Dow, which is responsible for nearly half of Britain's container trade. They control major maritime terminals in Argentina, Australia, the Bahamas, Germany, Indonesia, Mexico, Myanmar, the Netherlands, South Korea and Tanzania. If owning and managing adjacent ports means that China somehow has operational control or strategic control over the Panama Canal, they also have it over the Suez, the Singapore Straits, the Mediterranean Sea and the English Channel. 1:35:45 Louis Sola: The fees that I think we are looking at, or have been looked at, the reason that we went there was because of the auctioning of the slots. And so what Panama did is they had a smaller percentage, maybe 20% allocation, and then they moved it up to 30% and 40% because it became a money maker for them. So as they were doing -- Sen. Marsha Blackburn (R-TN): Okay, let me interject here. The auctioning of the slots gives these the right to skip the queue? Louis Sola: Yes, ma'am. Sen. Marsha Blackburn (R-TN): Okay, so just for the record there. Continue. Louis Sola: So the auctioning of the slots. Under maritime law, it's first come first serve, but Panama has always put a certain percentage aside, and they started to put more and more. So we got a lot of complaints. We got a lot of complaints from LNG carriers that paid $4 million to go through, and we got a lot of complaints from agriculture that didn't have the money to pay to go through, because their goods were gonna go down. So if you look at the financial statements -- I'm a nerd, I look at financial statements of everybody -- the canal increased the amount of revenue that they had from about $500 million to $1.8 billion in the last three years just because of those fees. So this is what is very concerning to us. 1:39:20 Sen. Amy Klobuchar (D-MN): Do you know of any instances where the United States has been singled out or treated unfairly under the neutrality treaty in the operation of the canal? Daniel Maffei: I do not. I would add that one of the reasons why saying the US is disproportionately affected by raises in Canal fees and other kinds of fees at the canal is because the United States disproportionately utilizes the canal. 1:44:55 Louis Sola: We have a US port there, SSA, out of Washington State that I actually worked on the development of that many years ago, and helped develop that. That used to be a United States Navy submarine base, and we converted that. As far as the two ports that we have, they're completely different. One is a major infrastructure footprint, and also a container port that's moving 4 million containers a year. That's really phenomenal amount. That's more than Miami, Fort Lauderdale, and you've probably got to get Tampa and a little bit of Jacksonville in there to get that type of volume. And on the other side, we have a very small port, but it's a very strategic port on the Atlantic. So how are the operations done?I don't know how they don't make money. I mean, if you want to come right down to it, if they've been operating the port for 20 years, and they say that they haven't made any money, so they haven't been able to pay the government. That's what concerns me is I don't believe that we're on a level playing field with the American ports. 1:58:50 Eugene Kontorovich: I think the charges and fees are less of an issue because they don't discriminate across countries. We pay more because we use more, but it's not nationally discriminatory. 1:59:00 Eugene Kontorovich: The presence of Chinese companies, especially Chinese state companies, but not limited to them, do raise serious issues and concerns for the neutrality of the treaty. And I should point out, in relation to some of the earlier questioning, the canal, for purposes of the neutrality treaty, is not limited just to the actual locks of the canal and the transit of ships through the canal. According to Annex One, paragraph one of the treaty, it includes also the entrances of the canal and the territorial sea of Panama adjacent to it. So all of the activities we're talking about are within the neutrality regime, the geographic scope of the neutrality regime in the treaty. 2:00:30 Daniel Maffei: I actually have to admit, I'm a little confused as to why some of the senators asking these questions, Senator Blackburn, aren't more concerned about the biggest port in the United Kingdom being run by the Chinese. Petraeus in the port nearest Athens, one of the biggest ports in the Mediterranean, is not just run by a Chinese-linked company, it's run directly by a Chinese-owned company, and I was there. So you're on to something, but if you're just focusing on Panama, that's only part. 2:01:45 Louis Sola: About a year ago, when we were having this drought issue, there was also a lot of focus on Iran and how they were funding Hamas and the Houthis because they were attacking the Red Sea. What the United States has found is that Iranian vessels are sometimes flagged by Panama in order to avoid sanctions, so that they could sell the fuel that they have, and then they can take that money and then they can use it as they wish. Panama, at the time, had a very complicated process to de-flag the vessels. There was an investigation, there was an appeals process. By the time that OFAC or Treasury would go ahead and identify one of those vessels, by the time that they were doing the appeals and stuff like this, they've already changed flags to somewhere else. So when we went to Panama, we met with the Panamanian president, and I must say that we were very impressed, because he was 30 minutes late, but he was breaking relations with Venezuela at the time because the election was the day before. We explained to him the situation. The very next day, we met with the maritime minister, with US embassy personnel and Panama actually adjusted their appeals process so to make it more expedient, so if the United States or OFAC would come and say that this Iranian vessel is avoiding sanctions, now we have a process in place to go ahead and do that, and 53 vessels were de-flagged because of that. 2:06:05 Sen. John Curtis (R-UT): Is there any reason that China can't watch or do whatever they want from this bridge to get the intel from these containers? And does that concern anybody? Louis Sola: Well, it definitely concerns Southern Command, because they've brought it up on numerous occasions that there could be some sort of surveillance or something like that on the bridges. 2:20:30 Sen. Tim Sheehy (R-MT): We segregate ourselves artificially in a way that they do not. We segregate ourselves. Let's talk about military. Let's talk about intelligence. Let's talk about economics. They don't. China doesn't work that way. It's a whole of government approach. They don't draw a delineation between an economics discussion and a military one. And their attack may not look like Pearl Harbor. It may look like an everyday ship that decides, you know, it pulls into the locks and blows itself up. And now the locks are non-functional for our usage, and we can't support an inter ocean fleet transfer, and our ability to defend it, as you referred to Chairman, is now inhibited by the fact that we no longer have the military infrastructure around the canal that we did just as recently as 1999. 2:21:10 Sen. Tim Sheehy (R-MT): So from a commercial perspective, do the shipping companies have concerns over the security of the narrow waterways? We've the Strait to Malacca, we've got the Suez Canal, we've got Gibraltar, we've got Panama. Is that a concern that's thrown around in the boardrooms of the largest shipping corporations in the world? Joseph Kramek: Senator, I think it's something they think about every day. I mean, really, it's drawn into sharp relief with the Red Sea. It was what I call a pink flamingo. There's black swans that just come up and there's pink flamingos that you can see, but you don't act. But no one really thought a whole lot that one of the most important waterways in the world could be denied, and moreover, that it could be denied for such a sustained period. The good news is that -- Sen. Tim Sheehy (R-MT): And denied, I might add, by a disaffected non-state actor of Bedouins running around with rocket launchers, who also managed to beat us in a 20 year war in Afghanistan. My point to saying all this is we're just debating operational control of the canal, yet it seems very clear to all of us that a very simple act can debilitate the canal and eliminate our ability to use it in a matter of minutes with no warning, and we have no ability to intervene or stop that. To me, that means we do not have operational control of the canal. 2:30:40 Daniel Maffei: I will say that certainly we need to look at other kinds of ways to get US companies in positions where they can truly compete with the Chinese on some of these things. Blaming it all on Panama really misses the point. I've seen the same thing in Greece, where Greece didn't want to give the concession of its largest port to a Chinese company, but because of its financial difficulties, it was getting pressure from international organizations such the IMF, Europe and even maybe some of the United States to do so. So I just ask you to look at that. 2:31:20 Daniel Maffei: Panamanians are making far more on their canal than they ever have before. That's not necessarily a bad thing, as long as it's going to the right place. But where they're really making the money is on these auctions, and that is why it remains a concern of mine and I'm sure the chairman's. That is where we are looking at, potentially, using our authority under Section 19 of the Merchant Marine Act where we could, if we can show that it is a problem with the foreign trade of the US, it's interfering with foreign trade of the US, there are certain things that we can do. Marco Rubio Senate Confirmation Hearing to be Secretary of State Senate Foreign Relations Committee January 15, 2024 Watch on YouTube Clips 4:01:40 Marco Rubio: The thing with Panama on the canal is not new. I visited there. It was 2016. I think I've consistently seen people express concern about it, and it's encapsulized here in quote after quote. Let me tell you the former US ambassador who served under President Obama said: "the Chinese see in Panama what we saw in Panama throughout the 20th century, a maritime and aviation logistics hub." The immediate past head of Southern Command, General Laura Richardson, said, "I was just in Panama about a month ago and flying along the Panama Canal and looking at the state owned enterprises from the People's Republic of China on each side of the Panama Canal. They look like civilian companies or state owned enterprises that could be used for dual use and could be quickly changed over to a military capability." We see questions that were asked by the ranking member in the house China Select Committee, where he asked a witness and they agreed that in a time of conflict, China could use its presence on both ends of the canal as a choke point against the United States in a conflict situation. So the concerns about Panama have been expressed by people on both sides of the aisle for at least the entire time that I've been in the United States Senate, and they've only accelerated further. And this is a very legitimate issue that we face there. I'm not prepared to answer this question because I haven't looked at the legal research behind it yet, but I'm compelled to suspect that an argument could be made that the terms under which that canal were turned over have been violated. Because while technically, sovereignty over the canal has not been turned over to a foreign power, in reality, a foreign power today possesses, through their companies, which we know are not independent, the ability to turn the canal into a choke point in a moment of conflict. And that is a direct threat to the national interest and security the United States, and is particularly galling given the fact that we paid for it and that 5,000 Americans died making it. That said, Panama is a great partner on a lot of other issues, and I hope we can resolve this issue of the canal and of its security, and also continue to work with them cooperatively on a host of issues we share in common, including what to do with migration. 4:38:35 Sen. Mike Lee (R-UT): Now, President Trump has recently talked a little bit about the fact that there are some questions arising about the status of the Panama Canal. When we look to the treaty at issue, the treaty concerning the permanent neutrality and operation of the Panama Canal, we're reminded that some things maybe aren't quite as they should be there right now. Given that the Chinese now control major ports at the entry and the exit to the canal, it seems appropriate to say that there's at least an open question. There's some doubt as to whether the canal remains neutral. Would you agree with that assessment? Marco Rubio: Yes. Here's the challenge. Number one, I want to be clear about something. The Panamanian government, particularly its current office holders, are very friendly to the United States and very cooperative, and we want that to continue, and I want to bifurcate that from the broader issue of the canal. Now I am not, President Trump is not inventing this. This is something that's existed now for at least a decade. In my service here, I took a trip to Panama in 2017. When on that trip to Panama in 2017 it was the central issue we discussed about the canal, and that is that Chinese companies control port facilities at both ends of the canal, the east and the west, and the concerns among military officials and security officials, including in Panama, at that point, that that could one day be used as a choke point to impede commerce in a moment of conflict. Going back to that I -- earlier before you got here, and I don't want to have to dig through this folder to find it again, but -- basically cited how the immediate past head of Southern Command, just retired general Richardson, said she flew over the canal, looked down and saw those Chinese port facilities, and said Those look like dual use facilities that in a moment of conflict, could be weaponized against us. The bipartisan China commission over in the House last year, had testimony and hearings on this issue, and members of both parties expressed concern. The former ambassador to Panama under President Obama has expressed those concerns. This is a legitimate issue that needs to be confronted. The second point is the one you touched upon, and that is, look, could an argument be made, and I'm not prepared to answer it yet, because it's something we're going to have to study very carefully. But I think I have an inkling of I know where this is going to head. Can an argument be made that the Chinese basically have effective control of the canal anytime they want? Because if they order a Chinese company that controls the ports to shut it down or impede our transit, they will have to do so. There are no independent Chinese companies. They all exist because they've been identified as national champions. They're supported by the Chinese government. And if you don't do what they want, they find a new CEO, and you end up being replaced and removed. So they're under the complete control of their government. This is a legitimate question, and one that Senators Risch had some insight as well. He mentioned that in passing that needs to be looked at. This is not a joke. The Panama Canal issue is a very serious one. 4:44:30 Marco Rubio: In 2016 and 2017 that was well understood that part of the investments they made in Panama were conditioned upon Panama's ability to convince the Dominican Republic and other countries to flip their recognition away from Taiwan. That happened. Jen Briney's Recent Guest Appearances Travis Makes Money: Make Money Podcasting About Congress with Jennifer Briney Give and Take: Considering the State of the Union, with Jennifer Briney Music Tired of Being Lied To by David Ippolito Editing Pro Podcast Solutions Production Assistance Clare Kuntz Balcer