Canal deal gives strategic edge to China, critics charge
Chinese-Panama Canal deal draws scrutiny
By GLENN GARVIN
Herald Staff Writer
PANAMA -- The object of bitter contention long before the day
of its official birth
85 years ago, the Panama Canal has touched off one last rancorous dispute
between the United States and Panama in the final months before it changes
A loose U.S. alliance of congressional Republicans, retired military
conservative think tanks is charging that a Panamanian contract privatizing ports
at either end of the canal amounts to handing the waterway over to China, which
many of them expect to be America's main rival for world power in the next
Panamanians, meanwhile, accuse Washington of hypocrisy, preaching
wonders of the global economy while lashing out at anybody who strikes a deal
that doesn't involve the United States.
The dispute is unlikely to be resolved before Panama takes over
control of the
canal on Dec. 31 under the terms of a pair of 1977 treaties that have at long last
come to fruition. And it may poison what many leaders in both countries hoped
would be a new and less pugnacious relationship between Panama and the
``We're not going to invade Panama or renounce the treaties, and
going to break the port contract,'' said a U.S. congressional staffer who is deeply
involved in the issue. ``Instead, this thing is just going to sit there and fester.''
At issue is a contract awarded in 1997, giving the Hong Kong-based shipping
company Hutchison Whampoa the rights to operate the ports of Balboa, near the
Pacific entry to the Panama Canal, and Cristobal, near the Atlantic entry.
Hutchison Whampoa is controlled by Hong Kong tycoon Li Ka-shing,
71-year-old billionaire ranked as the ninth most powerful man in Asia by the
magazine Asia Week. Both his power and his money, financial and political
analysts say, derive in large part from his intimate connections to the government
Through various interlocking directorates and joint projects,
Li and his business
empire are linked to several companies known as fronts for Chinese military and
intelligence agencies. One of the companies has been indicted for smuggling
automatic weapons into the United States for sale to Los Angeles street gangs.
Li has also been accused of helping to finance several deals in which military
technology was transferred from American companies to the Chinese army.
`Given the farm away'
Although U.S. critics have been complaining for nearly three years
contract giving control of the ports to Hutchison Whampoa, their efforts reached
critical mass only this month, when -- after several pieces appeared in
conservative magazines -- Senate Majority Leader Trent Lott wrote Defense
Secretary William Cohen that ``we have given the farm away without a shot being
``This administration is allowing a scenario to develop where
security interests could not be protected without confronting the Chinese
communists in the Americas,'' Lott wrote. ``U.S. naval ships will be at the mercy
of Chinese-controlled pilots and could even be denied passage through the
Panama Canal by the Hutchison, an arm of the [Chinese] People's Liberation
Lott's letter drew quick denials from the Defense Department,
Department and the White House. ``The United States is satisfied our interests
will be protected after the canal is turned over this December,'' said David Leavy, a
White House spokesman. ``We have seen no capability on the part of [China] to
disrupt the canal's operations.'' Hutchison Whampoa spokeswoman Nora Yong
called Lott's claims ``untrue and unfounded.''
Indeed, a Herald examination of the 48-page contract between Panama
Hutchison Whampoa suggests that many of Lott's specific claims are false. There
is nothing in the contract giving the company any authority over the canal's pilots
or the right to determine what ships use the canal.
Canal officials say that, even if the contract did grant Hutchison
rights, it would be overruled by Panamanian law and the country's constitution,
both of which clearly guarantee the canal's neutrality and place it under the
government's direct authority.
``There have been some really gross misrepresentations made in
the past few
weeks,'' said Joseph Cornelison, the canal's deputy administrator, who noted that
the ports are not part of the canal and have nothing to do with its operation. ``The
communist Chinese are not taking over the canal. They do not control the canal.
They have a presence near the opening of the canal, and that's all.''
But some critics of the deal believe that the mere presence of
a company linked
to Chinese military and intelligence apparatus is a bad deal for the United States,
regardless of whether it has any legal authority over the canal.
`China is not our ally'
``China is not our ally, no matter what the Clinton administration
Kenneth de Graffenreid, who worked at the National Security Council during the
Reagan administration and now teaches intelligence studies at the Institute of
World Politics in Washington.
``China is working against our interests in the India-Pakistan
conflict, in the
Taiwan Straits, in North Korea, in stealing our nuclear secrets. The Chinese are
the largest purveyor of arms to bad-guy regimes in the world. . . . The canal may
not be as strategically important to us as it once was, but it's still important, and
permitting a Chinese presence there is not prudent statecraft.''
Other critics of the deal say that Hutchison Whampoa's control
of the ports must
be seen in the context of other Chinese moves in the Western Hemisphere --
particularly a deal with Brazil to co-develop an imaging satellite, scheduled for
launch late this year.
``The satellite knowledge they'll gain out of that deal will be
directly applicable to
their military space program,'' said one congressional staffer. ``The Chinese are
trying to establish a military foothold in this hemisphere to divert American
interests. We have an extensive military presence in Asia -- it simply makes
sense they create areas of influence in our hemisphere to divert our attention.''
Panamanian officials admit they know little of Hutchison Whampoa's Chinese
military connections -- in fact, several members of President Ernesto Perez
Balladares' Cabinet who played key roles in negotiating the contract originally
thought the company was British.
But, they say, U.S. foreign policy concerns are not Panama's problem.
at the canal as purely a commercial thing, not a geopolitical thing,'' said Roberto
Roy, a member of the Panama Canal Authority, which will manage the canal
when the United States gives up control on Dec. 31.
``But even if you look at it as a geopolitical thing, from Panama's
balanced. We have granted concessions along the canal to companies from
China, from Taiwan, from the United States. That's economically and politically
Adds former newspaper publisher Roberto Eisenman, a key advisor
President Mireya Moscoso, who takes office Sept. 1: ``What's important to us is
that Hutchison Whampoa has already spent $100 million renovating those ports.
We're going to have the most modern ports in the world.''