Trump is threatening to take over the Panama Canal. Why?

Washington: President-elect Donald Trump has floated the idea of taking over the Panama Canal – a vital maritime route for global trade that was once under American control. At a rally in Arizona on Sunday, Trump criticised fees to use the vital Latin American shipping lane, a day after complaining on social media that the United States “foolishly gave it away” during the Carter administration and that China had expanded its influence on the canal.

More than half of the ships that travel the canal are headed to or from American ports, but the United States does not own or control the shortcut between the Pacific and the Atlantic. And China is already increasing its foothold in Latin America, traditionally the United States’ backyard, with the opening of a port in Peru, and designs on its own closer shipping routes between the Americas and the Pacific.

Here’s what you need to know about this key interoceanic waterway, which Panama’s president says is not for sale.

A cargo ship traverses the Panama Canal.Credit: AP

What is the Panama Canal?

The Panama Canal is one of the modern engineering wonders of the world, according to the American Society of Civil Engineers. It opened in 1914 after a US-backed secession of the land and before decades of contentious intercontinental negotiations for its control.

The 80-kilometre-long man-made waterway slices through the isthmus of Panama, where a system of locks raises and lowers ships navigating the Pacific and Atlantic oceans’ different water levels. Operating like an interoceanic elevator, the canal provides an essential shortcut for vessels that would otherwise have to face a lengthy – and more dangerous – journey around Cape Horn on the southern tip of South America.

By significantly reducing the travel time and costs of transporting goods, the Panama Canal is a vital passage for global supply chains, handling about 5 per cent of the world’s seaborne trade, according to the International Monetary Fund.

Cargo ships wait to transit the Panama Canal, one of the world’s busiest trade routes.Credit: AP

Who built the canal?

In 1881, France was the first to attempt to build a canal in what was then Colombian territory, The Washington Post’s Joanne Omang reported in 1977. However, the combination of incessant rain and severe outbreaks of yellow fever and malaria led France to pull the plug on the project about seven years later.

Following a push by president Theodore Roosevelt, Congress in 1902 authorised the purchase of the French assets and the plans to build a canal. However, the Colombian government rejected a US bid for the land to build a canal, according to the State Department. Shortly afterwards, the Roosevelt administration threw its military weight behind a brewing independence movement, Omang reported.

President-elect Donald Trump doesn’t like the US paying fees to use the Panama Canal.Credit: Getty Images

In late 1903, 12 days after the United States recognised the newly minted Republic of Panama, the Central American nation took sovereignty and exclusive possession over the Panama Canal Zone. Construction of what Roosevelt once hailed in a speech as “a gigantic task – the largest piece of engineering ever done” began in 1904 and concluded a decade later.

The feat cost an estimated $US375 million, which would be about $US11.6 billion ($11.5 billion) in today’s money – the most expensive construction project in US history at that time – and solidified the nation’s role in global trade.

However, tensions over the canal’s American possession spilled over the decades that followed. The growing nationalist sentiment in Panama and increasing anti-American protests over the canal zone ultimately led President Jimmy Carter to negotiate the end of US control.

In 1977, the Torrijos-Carter Treaties set the stage for Panama to gain full control of the canal by 1999.

It is not clear how Trump, who also recently reiterated a desire to acquire Greenland for the United States, may try to change that.

Who owns the canal?

The short answer: Panama.

The US had exclusive possession of the canal until 1977 when the Torrijos-Carter Treaties were signed. From then until 1999, the canal was jointly managed by the two nations.

On December 31, 1999, The Post reported at the time, Panama took over the canal’s administration, operations and maintenance.

The Stolt Lotus tanker ship navigates through the Miraflores locks of the Panama Canal near Panama City on Sunday.Credit: Bloomberg

Since that handover, the canal has become the centrepiece of Panama’s economy – generating about $US4 billion in revenue each year. According to the US International Trade Administration, about 70 per cent of ships moving through the canal are going to or coming from US ports.

Panamanian President José Raúl Mulino said he aspired to “maintain and preserve a good and respectful relationship” with the incoming Trump administration. However, he said in a written statement on Sunday, Panama’s control over the canal is “irreversible”.

“We are a country open to dialogue, today and always, to investments and good relations, but with the clear slogan that the country comes first,” Mulino wrote.

Mulino took a more defiant stance in a Sunday video addressed to his “compatriots”.

“Every square metre in the Panama Canal and its adjacent area belongs and will always belong to Panama,” he said in the clip posted on X. “The sovereignty and independence of our country are not negotiable.”

Luis Almagro, the secretary general of the Organisation of American States, reposted the video and said on X: “We expect the fullest and unrestricted compliance with the Agreements signed, approved and in force between the two countries.”

The Washington Post