The Current - Trump threatens to retake Panama Canal

Episode Date: January 7, 2025

U.S. president-elect Donald Trump is threatening to retake control of the Panama Canal, but Panama's president says it's not for sale. Dennis M. Hogan has studied this critical artery of global trade for years, he explains how it’s yet again become a centre of geopolitical tension.

Viking. Committed to exploring the world in comfort. Journey through the heart of Europe on a Viking longship with thoughtful service and cultural enrichment on board and on shore. Learn more at Viking.com. This is a CBC Podcast. Hello, I'm Matt Galloway and this is The Current Podcast. We are less than two weeks away from Donald Trump's inauguration and the president-elect is laying the groundwork for what he wants to do when he takes office. Recently, he has floated the idea of making Canada the 51st state, buying Greenland, and taking control of the Panama Canal.

We will demand that the Panama Canal be returned to the United States of America in full, quickly and without question. I'm not going to stand for it. This comes just as Panama celebrates 25 years since their takeover of the canal from the United States. Donald Trump claims the US is being ripped off in high fees for using the passage to move their goods. Panama's president, Jose Raul Molino, has hit back, asserting that the canal is not up for grabs.

Dennis M. Horrigan has studied the Panama Canal for years. He's a writer and lecturer on history and literature at Harvard University. Dennis, good morning. Morning. Let's start with the obvious. Can Donald Trump just take control of the Panama Canal? No, there's no legal mechanism whereby Donald Trump just take control of the Panama Canal? No, there's no legal mechanism whereby Donald Trump

could take control of the Panama Canal. The canal, which was operated by the United States for several, for about nine decades, was returned to Panamanian control in 1999. And that was, that deal was final. How did, I mean, get to this place where America's tie to the canal leads it to believe, leads Donald Trump to believe that it's, you know,

his or the country's to retake. Well, you know, there is some truth to the fact that the United States, I mean, the United States did build the canal. Back in 1903, when Panama declared independence from Columbia, getting the canal built was a major motivator for that secession. The United States then created a deal

that allowed the United States to alienate a major piece of Panama's territory to expel Panamanian civilians living along the proposed canal route, and then operated the canal basically almost as a US colony for decades and decades. And it's still one of the key arteries for US trade, about 40% of US destined container trade

goes through the Panama Canal. So it's not, you know, it is in the nation's commercial interest to have a smoothly operating Panama Canal. He loves, Donald Trump loves to say that the United States is being ripped off. How does that apply or does it apply to the operation of the Panama Canal, given as you said how important it is on the US economy? Well, it's fair to say that fees have been going up at the canal as operating expenses have been going up.

With the pandemic, the costs of moving goods became much higher. And then the drought that affected Panama between 2023 and 2024, which was one of the worst on record at the canal, forced the Canal Authority, which is the state-run agency that operates the canal and the watershed that feeds it, had to raise fees, had raised fees before the drought and then had to implement auctions to determine which ships would be able to go through the limited number of passages.

I should say that those auctions are over, the canal has returned to full capacity, but it is a strategy that they have to implement at times when water supply, which the canal depends on in order to operate its locks is low. I wanna talk about that water supply in a moment because that's fascinating in terms of the scale. But is there anything, aside from taking it back,

is there anything that Donald Trump or the United States could do to exert more control over the Panama Canal? Well, I think that's a complicated question because on the one hand, the Panamanian government is sovereign and the Panamanians do control the canal. That is clearly established by the treaties and I should add, they've been running the canal very well for the last 25 years.

On the other hand, the United States has always exercised enormous influence in Latin America. And when the United States chooses to engage with Latin American countries, whether it does it in ways that are that are honorable or not so honorable, you know, those those countries leaders do tend to pay attention. And so yeah, I do suspect there are ways that a US government could put pressure on a Panamanian government. But I think the other question is, you know, is it fair, is it right? And then what would it achieve?

You know, the tolls are the same for everyone, no matter where your cargo is going and no matter what flag your ship is flying. What about China? Because again, Donald Trump has said that China is asserting undue influence over the Panama Canal. We'll talk about whether that's true or not, but what are his claims? Why is he pointing the finger at China here?

So Trump is pointing the finger at China because a Hong Kong based company has the contract to operate two ports, one on the Pacific side and one on the Atlantic side of the canal. And you know, this is not uncommon. It's pretty frequent that port operators are, you know, operating on a contract and sometimes the companies that actually run the ports aren't based in the country where the port is located. But there's a huge difference between a fairly standard commercial contract for port operation, which belongs to a Chinese company,

and then what Trump has said, which is that the Chinese government itself somehow has a hand in running the canal, which President Molino, as you referenced earlier, has flatly denied. The canal is neutral and there's no soldiers or political or military influence from any other country involved in its operation. Just the last point on the, it's interesting that we're talking about this at a time when Jimmy Carter's funeral is underway right now. The former president was the person who signed

that declaration that turned over the canal to, and the operation of the canal to Panama. And there's just been this long simmering debate in some corners of the United States as to whether that was a strategic mistake. And it seems that that's playing out now. That's entirely right. And that's been a discussion

since before the treaties were signed. Back in 1976, when Ford was president and was entering into talks with the Panamanian government about a possible canal return, it was a huge political issue for Reagan, who famously coined the phrase, we built it, we paid for it, it's ours. And over time, that sense of grievance

or that sense that returning the canal to the Panamanians was a strategic mistake has retreated from public view, but obviously it's still been nurtured on some sectors of the American right. And Donald Trump is really good at finding issues like that, that tap into, that make sense to some kinds of people on an intuitive level. You know, we built it, we paid for it, it's ours. Why not? Why shouldn't we take it back? You wrote this fascinating opinion piece

in the New York Times last week about the canal and in it you said that China and Donald Trump aren't actually the most pressing concerns for the Panama Canal, if they aren't, what is? I would say it's climate change. I referenced the 2023 to 2024 drought that took place. And you know, I should say in fairness, that drought was a product of an El Nino year

and a really strong El Nino year. And there is some concern among climate scientists about what the effect could be on future El Ninos as the planet warms. But there's other ways the climate change is affecting the canal too. It's changed rain and wind patterns and hotter climates have sped the evaporation of water

off of the reservoirs that the canal uses to operate. And you said, I mean, the reservoirs are fascinating because in the piece you said, what? Sending a single ship through the locks of the Panama Canal can use around 50 million gallons of water? That's right. That's an incredible, it's hard to wrap your head around that amount.

That's right. And it's huge. And you know, if you or your listeners ever do go through or transit through the canal, you know, these are enormous ships. If you or your listeners ever do go through or transit through the canal, you know, these are enormous ships. The Panamanians carried out a canal expansion back in 2016 that allowed for even larger ships to transit the canal because, you know, the original canal was built for ships that

they had in 1914. And of course, ships have only gotten bigger since then. But bigger ships means bigger locks means more water. And that water at you know, once the ship goes to the ocean, it rushes out to sea. They have instituted some some limited measures to recapture some of that water. But once the water mixes with seawater, it becomes brackish water. And then it can't easily be pumped back into the lake without changing the salinity of the freshwater lake, which also feeds drinking water to Panama City

and irrigation water to farms around the country. So if there isn't, given that number, the amount of water that's required and the ships keep getting bigger and bigger and bigger, if there isn't enough water in the canal to have kind of a constant steady flow of vessels. What does that mean for global markets? Because presumably, I mean, there's supply and demand.

You have companies that are paying more to get access to the canal. But what does that mean for global markets and for international trade? Well, it means that over the long-term, shippers are gonna start to seek alternate routes. And we saw some of that happen during the drought. And the drought was in many ways

a preview of what a new normal could look like in a global warming scenario where the climate in Panama becomes potentially permanently drier. And so ships will choose longer routes, they'll choose to drop off their goods at other ports and then use things like rail links to get goods to their final destinations. Things will take longer to arrive at ports and potentially be more expensive when they get there. I think that the Panama Canal Authority has considered the scenario and obviously for them, maintaining the canal's prominence on the routes where it's used is existential. And so they do have plans to try to secure more water. But I do think that the long-term challenge

is going to be attempting to stop or at least limit the effects of climate change. But of course, that's not something that's within the control of Panama alone. And doesn't generate the headlines to the same degree, perhaps as declarations in Donald Trump that he's gonna snatch it back. Isn't that true?

Dennis Hogan, it's great to talk to you about this. The numbers and the scale of this is fascinating, but also the impact on our daily lives. Thank you very much. Thank you so much. I really appreciate you taking the time. Dennis M. Hogan teaches history and literature at Harvard University. He was in Providence, Rhode Island.