Trump can’t take Panama Canal on his own

Teddy Roosevelt once declared the Panama Canal “one of the feats to which the people of this republic will look back with the highest pride.” More than a century later, Donald Trump is threatening to take back the waterway for the same republic.

The president-elect is decrying increased fees Panama has imposed to use the waterway linking the Atlantic and Pacific oceans. He says if things don’t change after he takes office next month, “We will demand that the Panama Canal be returned to the United States of America, in full, quickly and without question.”

Trump has long threatened allies with punitive action in hopes of winning concessions. But experts in both countries are clear, unless he goes to war with Panama, Trump can’t reassert control over a canal the US agreed to cede in the 1970s.

What is the canal?

It is a man-made waterway that uses a series of locks and reservoirs over 51 miles (82 kilometers) to cut through the middle of Panama and connect the Atlantic and Pacific. It spares ships having to go an additional roughly 7,000 miles (more than 11,000 kilometers) to sail around Cape Horn at South America’s southern tip.

The US International Trade Administration says the canal saves American business interests “considerable time and fuel costs” and enables faster delivery of goods, which is “particularly significant for time sensitive cargoes, perishable goods, and industries with just-in-time supply chains.”

Who built it?

An effort to establish a canal through Panama led by Ferdinand de Lesseps, who built Egypt’s Suez Canal, began in 1880 but progressed little over nine years before going bankrupt.

Malaria, yellow fever and other tropical diseases devastated a workforce already struggling with especially dangerous terrain and harsh working conditions in the jungle, eventually costing more than 20,000 lives, by some estimates.

Panama was then a province of Colombia, which refused to ratify a subsequent 1901 treaty licensing US interests to build the canal. Roosevelt responded by dispatching US warships to Panama’s Atlantic and Pacific coasts. The US also prewrote a constitution that would be ready after Panamanian independence, giving American forces “the right to intervene in any part of Panama, to re-establish public peace and constitutional order.”

In part because Colombian troops were unable to traverse harsh jungles, Panama declared an effectively bloodless independence within hours in November 1903. It soon signed a treaty allowing a US-led team to begin construction.

Some 5,600 workers died later during the US-led construction project, according to one study.

Why doesn’t the US control the canal anymore?

The waterway opened in 1914, but almost immediately some Panamanians began questioning the validity of US control, leading to what became known in the country as the “generational struggle” to take it over.

The US abrogated its right to intervene in Panama in the 1930s. By the 1970s, with its administrative costs sharply increasing, Washington spent years negotiating with Panama to cede control of the waterway.

The Carter administration worked with the government of Omar Torrijos. The two sides eventually decided that their best chance for ratification was to submit two treaties to the US Senate, the “Permanent Neutrality Treaty” and the “Panama Canal Treaty.”

The first, which continues in perpetuity, gives the US the right to act to ensure the canal remains open and secure. The second stated that the US would turn over the canal to Panama on December 31, 1999, and was terminated then.

Both were signed in 1977 and ratified the following year. The agreements held even after 1989, when President George H.W. Bush invaded Panama to remove Panamanian leader Manuel Noriega.

In the late 1970s, as the handover treaties were being discussed and ratified, polls found that about half of Americans opposed the decision to cede canal control to Panama. However, by the time ownership actually changed in 1999, public opinion had shifted, with about half of Americans in favor.

What’s happened since then?

Administration of the canal has been more efficient under Panama than during the US era, with traffic increasing 17% between fiscal years 1999 and 2004. Panama’s voters approved a 2006 referendum authorizing a major expansion of the canal to accommodate larger modern cargo ships. The expansion took until 2016 and cost more than US$5.2 billion.

Panamanian President José Raúl Mulino said in a video Sunday, “Every square meter of the canal belongs to Panama and will continue to.” He added that, while his country’s people are divided on some key issues, when it comes to our canal, and our sovereignty, we will all unite under our Panamanian flag.

Shipping prices have increased because of droughts last year affecting the canal locks, forcing Panama to drastically cut shipping traffic through the canal and raise rates to use it. Though the rains have mostly returned, Panama says future fee increases might be necessary as it undertakes improvements to accommodate modern shipping needs.

Mulino said fees to use the canal are “not set on a whim.”

Jorge Luis Quijano, who served as the waterway’s administrator from 2014 to 2019, said all canal users are subject to the same fees, though they vary by ship size and other factors.

“I can accept that the canal’s customers may complain about any price increase,” Quijano said. “But that does not give them reason to consider taking it back.”

Why has Trump raised this?

The president-elect says the US is getting “ripped off” and “I’m not going to stand for it.”

“It was given to Panama and to the people of Panama, but it has provisions — you’ve got to treat us fairly. And they haven’t treated us fairly,” Trump said of the 1977 treaty that he said “foolishly” gave the canal away.

The neutrality treaty does give the US the right to act if the canal’s operation is threatened due to military conflict — but not to reassert control.

“There’s no clause of any kind in the neutrality agreement that allows for the taking back of the canal,” Quijano said. “Legally, there’s no way, under normal circumstances, to recover territory that was used previously.”

Trump, meanwhile, hasn’t said how he might make good on his threat.

“There’s very little wiggle room, absent a second US invasion of Panama, to retake control of the Panama Canal in practical terms,” said Benjamin Gedan, director of the Latin America Program at the Woodrow Wilson International Center for Scholars in Washington.

Gedan said Trump’s stance is especially baffling given that Mulino is a pro-business conservative who has “made lots of other overtures to show that he would prefer a special relationship with the United States.” He also noted that Panama in recent years has moved closer to China, meaning the US has strategic reasons to keep its relationship with the Central American nation friendly.

Panama is also a US partner on stopping illegal immigration from South America — perhaps Trump’s biggest policy priority.

“If you’re going to pick a fight with Panama on an issue,” Gedan said, “you could not find a worse one than the canal.”

Courtesy: Associated Press

United States: Disrupter of Global Trade

Washington has taken further steps to increase pressure on Tehran. This time, the White House, despite the negative impact of its decisions on the global stage, has leveraged its political influence on Panama to counter Tehran’s expansion of foreign policy.

The US has opted to exert pressure on Panama to prohibit Iranian vessels, sanctioned by Washington, from flying its flag. During a visit to Panama on Wednesday, Abram Paley, Deputy Special Envoy in the US Office of the Special Envoy for Iran, stated that the measure aims to prevent ships from being utilized for what he termed as illegal actions.

Paley emphasized in a statement that the US is endeavoring to enhance the enforcement of sanctions as part of a broader diplomatic outreach campaign. "Iran and affiliated entities are attempting to circumvent sanctions here in Panama," he remarked. "They seek to exploit Panama's flag registry."

"We anticipate that the Panamanian government will continue to collaborate with us in accordance with their domestic legislation and international commitments," Paley added.

Washington's recent action follows shortly after Iranian Oil Minister Javad Owji declared that Tehran's oil sales would remain unaffected by sanctions, even if Donald Trump were to win the US presidential elections in November.

Panama leads globally in providing flags of convenience, enabling shipping companies to register their vessels in countries with which they have no connection — for a fee and exemption from oversight.

It appears that the White House intends to reinforce the implementation of existing sanctions as the regional crisis escalates. This move by Washington stands in stark contrast to what Washington's Iran hawks call Biden's appeasement policy in West Asia.

The United States has consistently wielded its power as leverage to advance its interests, regardless of the potential repercussions on the regional and international scale. This approach is evident in the consistent US formula for intervening in the policy-making systems of other countries.

For instance, Washington's policy towards Caracas and the imposition of sanctions on Venezuela have served as tools for intervening in Venezuela's political system. Similarly, the US employs similar tactics in West Asia, as evidenced by the array of American military bases in the region and unwavering support for Tel Aviv. These actions reflect a policy that prioritizes Washington's interests above all else, irrespective of their broader effects.

The Biden Administration's pressure on Panama exemplifies this approach, indicating that Washington is not inclined to pursue diplomatic channels in its dealings with Iran. Instead, the primary objective appears to be preventing the Islamic Republic of Iran from expanding its political influence.

Despite the Biden administration's initial endorsement of a more conciliatory policy in West Asia and its expressed willingness to revive the 2015 Iran nuclear deal, formally called the JCPOA, the White House has demonstrated a lack of political resolve to take concrete actions. Moreover, the Biden administration has yet to lift any sanctions on Iran, failing to demonstrate a tangible commitment to resolving issues through diplomatic means. 

The recent US stance in Panama and its maneuver in the Red Sea have triggered alarm bells regarding their potential ramifications on the seamless flow of global trade. What emerges from these developments is a pattern of US behavior wherein the pursuit of its own interests takes precedence, even at the expense of disrupting international commerce. 

Take, for instance, the situation in Panama. The US exertion of pressure seems to transcend the immediate issue at hand, instead serving as a means to constrain Iran's influence. This strategic maneuver underscores Washington's inclination to prioritize geopolitical objectives over the broader interests of global trade. Similarly, the US confrontational stance towards certain factions in the Red Sea region has stirred unnecessary friction along a crucial trade artery.

Such actions raise legitimate concerns about the US approach to international affairs. By prioritizing its own objectives over collaborative efforts aimed at fostering global economic stability, the US risks sowing seeds of discord that could have far-reaching consequences. Indeed, this prioritization of unilateral interests over multilateral cooperation threatens to set off a chain reaction of instability, imperiling the very foundation upon which the global economy rests.

As the world navigates through increasingly complex geopolitical terrain, it becomes imperative for nations to uphold principles of cooperation and mutual benefit. The recent US actions serve as a sobering reminder of the dangers inherent in a myopic pursuit of national interests at the expense of broader global imperatives. Only through concerted efforts to promote dialogue, understanding, and collaboration can we hope to safeguard the integrity of the global trade system and steer clear of the choppy waters of economic uncertainty.

 

 

Suez Canal revenues to rise by 27% for financial year ending June 30, 2022

According to Finance Minister Mohamed Maait of Egypt, Suez Canal revenues are expected to rise to US$7 billion for the financial year 2021-22 ending on June 30, 2022, up 27% from US$5.5 billion for the last year.

Calendar year 2021 saw canal revenues hit a record US$6.3 billion, up 13% from US$5.6 billion seen in 2020.

The canal is the fastest route between Europe and Asia, and despite a 10% increase in toll rates implemented in March 2022, still saves shipping lines potentially hundreds of thousands of dollars in time and fuel, compared to sailings around the Cape of Good Hope.

Asian ship owners have been among the most vocal to complain about the toll hike, in addition to tariff increases introduced at the beginning of February this year.

Seatrade Maritime News calculates a 9.4% rise in fees for a southbound transit by a standard dry bulk vessel, as well as a similar increase in rebate, as of today, as compared to rates in November 2020.

Egypt mobilized public support for a widely subscribed national public debt program to finance a US$8.5 billion canal expansion, finished in 2015. Completion of further works is expected next year.

With container shipping lines reporting profits of around US$190 billion last year, US$60 billion in the first quarter of 2022, Egypt can be expected to maintain the pressure on toll rates for some time to come.

Despite the fact that tourism flows to Egypt declined by 35% due to the Russian invitation of Ukraine, Maait expects tourism revenues to hover around US$12 billion by the end of the financial year.

The canal, as well as tourism receipts are important to Egypt’s GDP, which the International Monetary Fund expects to reach US$435.6 billion in nominal terms in 2022.

The Asian Shipowners’ Association (ASA) member hit out at recent proposed toll changes at both the Panama Canal and Suez Canal.

At a meeting on April 18, 2022, ASA delegates noted the significance of the Suez and Panama canals as critical global infrastructure and called for the canals to avoid “sudden and significant” changes in tolls and charges.

“Delegates expressed their confusion against new surcharges introduced on March 01, 2022 with only 48 hours prior notice, then to be revised on May 01, 2022 by the Suez Canal Authority (SCA), which resulted in roughly a 7% to 20% toll increase for many types of vessels, in addition to a 6% tariff hike for most types of vessels, implemented on February 01, 2022,” said ASA.

Uncertainty around how surcharges operate could undermine the stability of the Canal, said the committee, calling for the industry to express its concerns to SCA.

ASA delegates some positives in the Panama Canal’s new toll system proposed earlier in April 2022 by the Panama Canal Authority (ACP). Delegates said the ACP had given sufficient notice and a formal consultation period, but were concerned that significant toll hikes could affect the long-term viability of the canal, “as the mark-up for some types of vessels may exceed 100% in 2025, compared with the current toll.”

The ASA meeting also discussed the review of anti-trust exemptions for carriers on the US, a policy delegates said was “indispensable for the healthy development of the liner shipping industry and the maintenance of a reliable service to the entire trading community.” ASA will continue its efforts to maintain anti-trust exemptions for liner shipping agreements.

 

Asian Shipowners’ Associations oppose hike in toll changes by Panama and Suez Canals

According to Seatrade Maritime News, Asian Shipowners’ Associations (ASA) are critical of recent proposed toll changes at both Panama Canal and Suez Canal Authorities. At a recent meeting, ASA delegates expressed concern and disappointment over the proposed hike in canal toll changes.

They reiterated the significance of Suez and Panama canals as critical global infrastructure and called for the canal authorities to avoid sudden and significant changes in tolls and charges.

“Delegates expressed their confusion against new surcharges introduced on March 01, 2022 with only 48 hours prior notice, then to be revised on May 01, 2022 by Suez Canal Authority (SCA), which resulted in roughly a 7 to 20 percent increase in toll for different types of vessels, in addition to a 6 percent tariff hike for most types of vessels, implemented on February 01, 2022,” said ASA.

Uncertainty around how surcharges operate could undermine the stability of the Canal, said the committee, calling for the industry to express its concerns to SCA.

ASA delegates appreciated some positives in the Panama Canal’s new toll system proposed earlier in April 2022 by the Panama Canal Authority (ACP). Delegates said the ACP had given sufficient notice and a formal consultation period, but were concerned that significant toll hikes could affect the long-term viability of the canal, “as the mark-up for some types of vessels may exceed 100% in 2025, as compared to the current toll.”

The ASA meeting also discussed the review of anti-trust exemptions for carriers on the US, a policy delegates said was “indispensable for the healthy development of the liner shipping industry and the maintenance of a reliable service to the entire trading community.” ASA will continue its efforts to maintain anti-trust exemptions for liner shipping agreements.