Seriously, China is failing to take over the Panama Canal!!

Oh Atlantic Council, I thought more highly of you

So a week ago the Atlantic Council came out with a piece entitled, “The US is right to be concerned about China’s influence over the Panama Canal,” by LTC Gregg Curley.¹ And it’s bad. I gotta write a short piece here pointing out that it’s bad.

It’s not all bad. Some is ugly and some is good. So let’s start with the ugly. There’s a brief history of the Canal. It ain’t terrible, although it cites incorrect figures about the cost and time to build the Panama Canal. That said, those figures do come from the Panama Canal website. So the bad numbers aren’t the author’s fault. The people behind the Panama Canal Authority (ACP) website should have known better. After all, the ACP gave me a prize for my book on the Big Ditch back in ‘13 and they still managed to publish the incorrect numbers on their website.

Thank you, Director Quijano!

So we can give LTC Curley a mulligan on the history.²

Now the good. LTC Curley correctly points out the Trump Administration indeed has a leg to stand on when they argue that Panama’s toll hikes might violate Article 3 of the Neutrality Treaty, which mandates that charges be “just, reasonable, equitable, and consistent with international law.”

But then the bad. We have this paragraph:

Trump’s recent comments on the Panama Canal’s transit fees and Chinese influence have thrust the canal to the forefront of US strategic discourse. Chinese companies such as Landbridge Group and the Hong Kong-based CK Hutchison Holdings now operate ports at both ends of the canal. This presence raises concerns about potential dual-use infrastructure and strategic maneuvering, particularly given China’s deepening ties to Latin America.

Oh come on! The Landbridge Group’s project fell apart. Yes, their project involved buying Margarita Island and turning it into a potential naval base, what the strategy types call a “dual-use facility.” But it did not happen.

Then he goes on to say:

The United States wields significant economic leverage over Panama. As the primary user of the canal and Panama’s largest provider of foreign direct investment—$3.8 billion annually—the United States can influence Panamanian decision making. Conversely, the United States and its partners present few viable alternatives to Chinese investment in the region.

Except, well, doesn’t the second sentence contradict the third sentence? In point of fact, there are plenty of American and European firms who could build the few projects that China actually got off the ground or operate the two Chinese-run ports.

China’s economic control on both sides of the canal raises concerns about the potential for rapid militarization and its ability to control canal access. Panama’s willingness to relinquish critical economic control of strategically significant areas and infrastructure—a hallmark of China’s Belt and Road Initiative strategy—casts doubt on Panama’s resolve and capacity to effectively safeguard the canal’s neutrality as agreed to in the treaty. The costs of a neutrality breach are significant enough that the United States may be justified in taking preemptive action.

No! China does not have economic control on any side of the Canal! That is not a thing that happened!

It is true that Chinese-controlled Hutchison does run intermodal operations on both sides of the Canal via their Panama Ports Company subsidiary.³ But Hutchinson’s two port operations aren’t even the biggest in the country! The biggest is run by an American-Panamanian joint venture (Manzanillo). The other two, meanwhile, are run by a Taiwanese conglomerate (Colón), and a Singaporean state-owned firm (PSA).

Yearly Container Movement by Port (TEU). Data from the Georgia Tech Panama Logistics Innovation and Research Center based on information from the Maritime Authority of Panama, available here.

Singapore and Taiwan are many things, but fronts for the People’s Republic of China they ain’t.

And more to the point, there are plenty of of companies from Allied countries (including the United States itself) that could easily take over the Chinese operations should Panama decide to kick them out.

To be frank, I don’t understand the claim that leases on these ports gives “economic control” of the Canal. The geography doesn’t really make sense. Here’s the Atlantic side of the Canal, with the Chinese-run ports in red (obviously) and the other two in navy blue, with the little ship icon:

And here is the Pacific side (same scale, same color scheme):

Ships going through the Canal bypass the port operations.⁴ Short of firing non-existent missiles at passing vessels, the port operators cannot stop them from using the passageway. The only thing the Chinese company “controls” is Pacific-side access to the Panama Railroad. Why that would be useful in a war is beyond me, especially when the United States would find it trivial to get forces to Panama whereas China is very very very far away.⁵

Yes, China would certainly love to take over the Panama Canal. But they’re treading lightly, because they know that the United States could toss them out at any time and it’s just not worth poking the American bear. If that weren’t the case, then they would have built the Nicaraguan Canal back when they had the chance.

They also happen to be remarkably bad at gaining influence, at least in Panama, where they seem to have enraged public opinion with very few projects to show for it.

But to return to the article: I understand that people have to write things under deadline or under pressure and often wind up hypothesizing. But the article here claims that China’s influence in Panama is rising, when all the evidence in TPTM’s New Year’s post on this subject suggests the reverse.

The Panama Canal is one battle of Cold War 2 that the United States should be able to win and win quickly without firing a shot, as long as we come in with a diplomatic plan. Sorry, China, it’s ours, we stole it first, fair and square.

1. Oh shit, he’s an LTC. A Marine LTC. I never got above SGT in the Army. Breathe, Maurer. Don’t be frightened of the big bad Marine officer, you used to work for a living …

2. I won’t give the Panama Canal Authority a mulligan, though! Why should they care that American construction project was a much bigger mess than David McCullough’s The Path Between the Seas would have you believe? That’s just gonna make the Panamanian expansion project a century later look even better!

3. That is, they run yards where containers can be transferred from one ship to another or onto the Panama Railroad for transit.

4. It’s worth taking a look at both ports on Google maps: they are extremely space constrained, with no room for military facilities.

5. There are no soldiers in the Hutchinson ports because there is no room for them. Nor are there other signs of military equipment or space to put it.