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The Panama Canal was built by the United States from 1904 to 1914. Under a 1903 treaty, the United States controlled both the waterway and a large section of the surrounding land, known as the Panama Canal Zone, as if they were U.S. territory. Panamanians resented this arrangement and argued that their country was unfairly denied benefits from the canal. Eventually, riots and international pressure led the United States to negotiate two new treaties. In 1977 U.S. President Jimmy Carter and the Panamanian leader, General Omar Torrijos Herrera, signed treaties that gave control of the canal and all its operations to Panama in 1999. The agreements were ratified by Panama immediately and by the United States the following year. The treaties recognized Panama’s ultimate ownership of the canal and all the surrounding lands. More than half of the former Canal Zone came under Panamanian control shortly after the treaties were ratified and control of the canal is scheduled to be turned over to Panama on December 31, 1999. The treaties also guarantee the permanent neutrality of the Panama Canal, allowing ships of all nations to use it even in time of war. The United States and Panama agreed to share in defense of the canal.
The Panamanian government has an ongoing reputation for corruption and mismanagement. By most accounts, an unfair and corrupt contractual bidding process, which was protested by the U.S. ambassador to Panama, enabled the Chinese Hutchison Whampoa Company to outmaneuver American and Japanese companies for the long-term lease on the Canal ports.
A Senate Committee on Foreign Relations staff report on the privatization of the Panamanian ports dated May 14, 1997, identified Hutchinson's subsidiary HIT, or Panama Ports Company, as being 10 percent owned by China Resources Enterprise (CRE), which is the commercial arm of China's "Ministry of Trade and Economic Co-operation."
The People's Republic of China [PRC], through the Hong Kong-based Hutchison Whampoa Ltd. company, which has close ties to the PRC government and People's Liberation Army [PLA], was granted a 25-year lease, with an additional 25-year option, for control of the Canal's Atlantic and Pacific Ocean ports of Balboa and Cristobal and adjacent facilities. The delegation witnessed Hutchison Whampoa conducting major construction and port facility expansion at both the Atlantic and Pacific Canal ports.
In 1997, the Hong Kong-based Hutchinson Whampoa company bought port facilities on both the Atlantic and Pacific sides of the canal. The company is highly rated by international maritime experts for its management of other such facilities around the world, but some US conservatives and former military men say it is a front for the Chinese Peoples Liberation Army. Company spokesmen deny any connection with the Chinese military.
Hutchison Whampoa will control the stevedoring [loading and unloading of ship cargo] at the ports. The company also has a substantial interest in the railroad line that coordinates transportation of cargo between the ports. In addition, the Chinese company is a major bidder on construction of a new suspension bridge that will link "land canal" highways that will truck oversized cargo containers between the Atlantic and Pacific coasts.
Under the controversial Law Number 5, secretly implemented by the Balladares regime, the Chinese Hutchison Whampoa company has the right of first refusal on other Canal facilities, including past strategic facilities and former U.S. bases such as the Rodman Naval Station port.
A clause was inserted at the end of "law #5" that states if a conflict between provisions of the law and provisions of the Canal treaty occur, the Canal treaty prevails.
Panamanian officials and business sector representatives say the Hong Kong company is only one of many to have invested in canal assets, which are being privatized as they are turned over to Panama. U-S companies have also participated. The Kansas Southern Railway, for example, is renovating the train line that parallels the canal in hopes of offering an alternative for moving goods across the isthmus.
Some public interest organizations warn of Chinese military bases eventually being created in Panama and even a future missile threat.
U.S. Rep. Bob Barr, R-GA, visited Panama on a recent fact-finding trip in early February 1998. Barr told WorldNetDaily "controlling ports at both ends of the canal will give the Communist Chinese the ability to shut the canal on and off at will. It also raises the possibility that ships could be trapped in the canal for extended periods by closed ports at one end or the other, This situation will dramatically raise the potential for U.S.-Chinese confrontations."
Senate Majority Leader Trent Lott recently wrote to Defense Secretary William S. Cohen that a Chinese shipping company is gaining broad authority over the Panama Canal and could deny passage to U.S. ships.
The canal is controlled by the
Panama Canal Commission, a panel of five Americans and four Panamanians who run
the waterway. The Panama Canal Commission spokesman said the treaty gives the
United States the right to intervene militarily to protect access.
Hong Kong tycoon Li Ka-shing dismissed suggestions that his company Hutchison Whampoa Ltd would control the Panama Canal when it begins operating container ports at each end of the strategic waterway. "We cannot possibly control the canal,'' Li told reporters in Hong Kong. "We are only an operator of container ports there.'' Li noted the container ports were for loading, unloading and storing cargo and had no role in operating the canal. "We are not even the largest operator in Panama, compared with some of the Americans and Taiwan operators,'' Li said. "We are running a container port business which has nothing to do with the operation of the Panama Canal.'' Hutchison is one of Hong Kong's biggest blue chip companies, with extensive holdings around the world. It is 49.97 percent owned by property developer Cheung Kong (Holdings) Ltd. Li, chairman of both Cheung Kong and Hutchison, rose from rags to riches in Hong Kong, making his fortune in the property market before diversifying into other areas.
"Responsibility for operation of the canal following the transfer will rest solely with the government of Panama. The company in question will have no control over, or role in, the operation of the canal,'' White House National Security Council spokesman David Leavy said on Tuesday.