Tuesday, January 28, 2025

The Chinese interests behind Trump’s Panama Canal bluster

Analysis


Panama has begun an audit of a Hong Kong company that operates ports at either end of its canal, aiming to dispel Washington’s fears of growing Chinese influence over a strategic waterway that President Donald Trump has vowed to “take back”.


Issued on: 23/01/2025 -
FRANCE24
By: Sébastian SEIBT

A crew member on board a Chinese container ship pictured during Xi Jinping's trip to Panama in December 2018. © Luis Acosta, AFP

As he laid out his “America First” agenda in his inaugural address on Monday, Trump made no mention of his most talked-about territorial fancies, such as buying Greenland or making Canada the 51st US state.

He did, however, repeat his pledge to take over the Panama Canal, suggesting control of the strategic waterway has taken precedence over his other expansionist goals.

The US, which played a pivotal role in building the 51-mile canal more than a century ago, agreed to gradually hand it over to Panama back in 1977, in what Trump has labeled a “foolish” move.


To justify “taking it back”, the 47th US president reiterated his claim that the main link between the Atlantic and Pacific oceans has come under Chinese influence.

“China is operating the Panama Canal and we didn’t give it to China,” he said. “We gave it to Panama and we’re taking it back.”
Two ports and an audit

Panama swiftly hit back at Trump’s remarks, denying Chinese influence and denouncing the US president’s threats in a letter to the UN secretary-general.

“We reject in its entirety everything that Mr Trump has said,” Panama's President Jose Raul Mulino told a panel at the World Economic Forum in Davos in Wednesday. “First because it is false and second because the Panama Canal belongs to Panama and will continue to belong to Panama.”

To counter allegations of Chinese influence, the Panamanian authorities announced “an exhaustive audit” of the Panama Ports Company, part of Hutchison Ports, itself a subsidiary of Hong Kong-based conglomerate CK Hutchison Holdings.

The controller’s office that oversees public entities said the audit was “aimed at ensuring the efficient and transparent use of public resources” at the company, which operates the ports of Balboa and Cristobal on either end of the canal.

02:03


The audit “is one of the few things Panama’s authorities can do right now to try to counter Trump’s accusations and alleviate US concerns”, said Tabita Rosendal, a specialist of Chinese foreign policy at Lund University in Sweden, who has worked on the maritime aspect of China's “New Silk Roads”.

“It's a clever move by Panama’s authorities because they know that Hutchison Ports will comply and that the audit will most likely not reveal anything suspicious,” added Benjamin Creutzfeldt, a specialist in relations between China and Latin American countries at the University of Leipzig in Germany, and director of the local Confucius Institute.

A Hong Kong magnate

The Hong Kong-based company, which promised full cooperation on Wednesday, has already undergone a number of audits in recent years and has always complied with the exercise, both experts noted. It has operated the ports of Balboa and Cristobal since 1997 and secured a second 25-year lease in 2021, without it causing a fuss.

A giant of the industry, Hutchison Ports is not the type of company that could be easily manoeuvred by Chinese authorities.

“It’s one of the world’s leading port investors, with massive portfolios,” noted Rosendal. “They have interests in 53 ports worldwide and more than 24 countries.”

The company notably operates the port of Stockholm in Sweden, as well as five Dutch ports and a dozen more in the Middle East. Given the scale of its assets, any collusion with China’s geopolitical interest would surely not go unnoticed.

CK Hutchison Holdings, Hutchison Ports’ parent company, is one of the largest conglomerates registered in Hong Kong, a Chinese territory where companies still enjoy a degree of freedom despite Beijing’s political and security clampdown on the former British colony.

Describing the company’s Panama assets as a tool in the hands of Beijing “fits in perfectly with Trump’s narrative that Hong Kong firms are aligned with the Chinese government”, said Rodrigo Martin, whose research at the University of Salamanca in Spain has focused on relations between Panama, China and the US.

Li Ka-shing, the founder of CK Hutchison Holdings, was once the richest man in Asia and remains one of Hong Kong’s most influential figures. Rumour has it that “for every dollar spent in Hong Kong, five cents end up in Li Ka-shing's pockets”, French business daily La Tribune wrote in 2014.

Wealth and influence have enabled the likes of Li Ka-shing to “maintain a degree of freedom from Chinese Communist Party surveillance that you wouldn’t see elsewhere in China”, said Rosendal.

Nonetheless, Creutzfeldt argued that the business magnate’s significant assets in mainland China “mean the central government has, de facto, a degree of influence over his conglomerate and, indirectly, over how it manages its network of ports”.


A snub over Taiwan


Trump’s criticism of the way the Panama Canal is run rests in part on his unsubstantiated claim that US vessels are charged “exorbitant” fees compared to Chinese ones – a purported inequity that he blames on pressure from Beijing.

In truth Hutchison Ports “has no say whatsoever in how the canal is managed”, said Creutzfeld. “It’s Panama’s government, via the Panama Canal Authority, that sets the fees based on decades-old agreements of neutrality,” added Rosendal.

All ships transiting the canal are subject to the same tariff, regardless of their country of origin. Since 75% of all ships are American and only 21% from China, the canal’s second biggest customer, the US inevitably pays more overall.

05:30


But Chinese influence in Panama does not stop at Hutchison Ports.


In recent years, China has spent billions of dollars developing infrastructure around the canal and elsewhere in Panama. In 2016, China’s Landbridge Group secured a $900-million contract to manage the port of Margarita, Panama’s largest, located not far from the Atlantic entrance to the canal.

The scale of Chinese investment shows that “Panama has become one of the most important countries for China’s strategy in Latin America”, said Martin. “It’s a gateway to the continent for China, both economically and diplomatically,” added Rosendal.

Beijing’s economic diplomacy delivered a symbolic victory in 2017 when Panama abruptly severed longstanding diplomatic ties with Taiwan.

The following year Panama became the first Latin American country to join China’s New Silk Road, becoming a key link in Beijing’s hugely ambitious global infrastructure programme.

Back to the Monroe Doctrine?


Panama’s move to ditch Taiwan and establish formal ties with China did not go down well with US officials.

“There was very tangible irritation in Washington with the way this was done, since US representatives were given little advance notice,” said Creutzfeldt. “And this continues to affect US relations with Panama.”

Another bone of contention is the “potential dual role of certain technologies that Chinese companies are deploying in Panama”, said Rosendal. She pointed to Huawei supplying the country with surveillance cameras that could, if Beijing wished to, be used to gather intelligence.

“There is not much concrete evidence that China is using them for surveillance, but the question of the risk to national security of this type of technology is certainly a concern for many countries,” she added.

Martin suggested that Trump’s threats could mark a return to the Monroe Doctrine, a 19th-century policy aimed at dissuading Europe’s colonial powers from interfering with the political affairs of the Americas.

In this case, the message would be that “Latin America is part of the US sphere of influence and that China should back off”, he said. “Perhaps the Panama Canal is just the first step towards building that narrative.”

The risk, Martin cautioned, is that Trump’s aggressive rhetoric backfires on the US.

“If Trump starts to threaten Panama’s security, maybe Panama will shift its support to China because Beijing is not a threat.”

This article was translated from the French original by Benjamin Dodman.

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