Hearings to examine the Panama Canal and its impact on U.S. trade and national security, focusing on fees and foreign influence

Defense Posture and Global ThreatsSenate Commerce, Science, and Transportation · 2025-01-28 · 119th Congress
The Senate Commerce, Science, and Transportation Committee held this hearing to examine whether Panama is violating the 1977 Neutrality Treaty through high canal transit fees and Chinese-linked port operations, and what this means for U.S. Begins at 0:17:05
Transcript
Highlights

Title

Panama Canal fees, treaty compliance, and Chinese influence

Purpose

The Senate Commerce, Science, and Transportation Committee held this hearing to examine whether Panama is violating the 1977 Neutrality Treaty through high canal transit fees and Chinese-linked port operations, and what this means for U.S. trade and national security. Witnesses from the Federal Maritime Commission, an international law professor, and the World Shipping Council testified about canal economics, drought-driven fee increases, and Chinese companies' control of ports at both ends of the canal. The committee's invited witness from the Panama Canal Authority declined to appear. Begins at0:17:05

Who spoke

Chair Ted Cruz (R-TX)0:17:05: Opened by describing the canal's history and cost, argued Panama may be violating the neutrality treaty via Chinese port control and a partially built bridge that could block transit0:19:19, and cited canal profits exceeding $3 billion annually0:19:52; later questioned witnesses on treaty violations and remedies including armed force0:55:242:35:07.

Sen. Maria Cantwell (D-WA), Ranking Member0:23:55: Noted 72% of canal cargo is U.S.-bound and highlighted Washington's maritime economy (170,000 jobs)0:24:27; pressed for a broader maritime strategy, cybersecurity investment, and warned against government "backdoors" in technology and vessels0:27:250:28:13; entered letters from two former U.S. ambassadors to Panama into the record0:27:25.

Louis "Lou" Sola, Chairman, Federal Maritime Commission0:31:51: Said the FMC and Panama's government/canal authority are legally "one entity"0:52:22; described Chinese-operated ports at Balboa and Cristobal paying zero in concession fees for 20 years versus Houston's $1 billion/year0:54:40; detailed his own family's marina concession being revoked and reassigned to a Chinese-backed developer for $300 million after Panama joined the Belt and Road Initiative2:23:05.

Daniel Maffei, Commissioner, Federal Maritime Commission0:36:28: Explained the FMC's 2024 investigation and Panama trip, found normal transits restored after drought but expects at least one more reduced-transit period0:39:29; cautioned that Hutchison Ports operates in many countries beyond Panama, so concern should extend globally1:26:56; said FMC revenue from canal auction fees has grown to $1.8 billion in the last three years [1:36:54, noted by Sola].

Eugene Kontorovich, professor (appearing virtually)0:41:08: Explained that Article Five bars foreign operation of the canal and that "control," not ownership, is the legal test, citing the UK-controlled Suez Canal Company precedent0:42:58; testified the treaty permits unilateral U.S. determination of violations and even armed force as a remedy0:58:16; agreed Chinese spies embedded in port operators would be a clear Article Five violation1:23:17.

Joseph Kramek, President/CEO, World Shipping Council0:46:27: Said 75% of canal traffic originates in or is bound for the U.S.0:47:56; said drought-driven restrictions cut import volumes 10% nationally and 26.6% at Houston0:49:33; called losing canal access "catastrophic," comparable to Red Sea diversions adding 40% to voyage times1:46:08.

Sen. Deb Fischer (R-NE)1:06:55: Asked whether the U.S. has recourse to rebid the no-bid 2021 port concessions1:07:18 and about freshwater infrastructure investment timelines1:09:59.

Sen. Lisa Blunt Rochester (D-DE)1:11:55: Asked whether the canal authority anticipated drought impacts1:13:32 and pressed on prioritizing perishable goods like Delaware fruit imports during transit slot auctions1:15:38.

Sen. Dan Sullivan (R-AK)1:17:38: Established the 2021 port concessions were extended without bidding and Hutchison paid $150 million in back taxes1:18:18; argued Chinese companies at both canal ends are legally obligated to cooperate with PRC security services under Chinese law, calling it a "suicide pact" risk in a Taiwan conflict scenario1:20:07; got Sola and Kontorovich to agree embedded Chinese spies would violate Article Five1:23:171:23:54.

Sen. Tammy Baldwin (D-WI)1:24:01: Cited a Section 301 finding that China built over 1,700 commercial ships in 2023 versus five for the U.S.1:25:31; asked for policy recommendations to compete with subsidized Chinese shipbuilding1:25:55.

Sen. Marsha Blackburn (R-TN)1:30:59: Asked whether Chinese canal investment is a direct national security threat (Sola said he lacked information)1:31:18; raised concern about a shift toward the digital yuan over the dollar in canal transactions1:34:26; got Sola to confirm canal revenue rose from $500 million to $1.8 billion in three years due to auction fees1:36:46.

Sen. Amy Klobuchar (D-MN)1:37:30: Raised concerns about an overnight federal funding freeze memo affecting port infrastructure grants1:38:04; asked about the Ocean Shipping Reform Act's effect on shippers' ability to contest unreasonable carrier fees1:41:22.

Sen. Ted Budd (R-NC) [1:12:28, then 1:43:42]: Touted the bipartisan Promoting Resilient Supply Chains Act with Cantwell and Blackburn1:12:20; entered a U.S.-China Economic Review Commission report into the record and cited a $3.4 billion Chinese-funded Ecuadorian dam project riddled with cracks and corruption as a regional cautionary example1:47:04.

Sen. Andy Kim (D-NJ)1:48:30: Pressed Sola directly on whether China operates the Panama Canal per President Trump's claim; Sola said the canal authority operates it, though Hutchison Ports controls both terminal ports1:49:021:50:01; cautioned against imprecise rhetoric that could itself undermine the canal authority's independence1:53:24.

Sen. Eric Schmitt (R-MO)1:54:18: Described a hypothetical Taiwan-crisis scenario where China closes Chinese-controlled canal ports1:54:40; announced he introduced a resolution calling on Panama to expel Chinese entities from port control1:56:06; argued foreign operation is the clearest treaty violation1:59:36.

Sen. John Curtis (R-UT)2:01:16: Asked how Panama has enabled Iranian sanctions evasion via flag-of-convenience vessels; Sola said Panama deflagged 53 vessels after U.S. pressure2:03:09; asked about surveillance risk from the Chinese-built bridge2:06:12.

Sen. Bernie Moreno (R-OH) [2:06:29... actually labeled Sen. Curtis in transcript but attributed to Moreno per intro]: Asked about Panamanian public sentiment toward the U.S.2:06:44; argued the treaty is "clearly in violation" and called for a resolution letting the President renegotiate or cancel it2:07:22; asked about drug/human trafficking impacts on maritime security in the Darién Gap area2:08:18.

Sen. Shelley Moore Capito (R-WV) [2:12:29 label region]: Noted 11% of canal cargo is coal, important to West Virginia2:12:54; asked why Panama hasn't yet added freshwater capacity despite a $900 million package2:14:13; raised concern about "congestion pricing" auctions favoring wealthier shippers2:15:45.

Sen. Tim Sheehy (R-MT)2:17:47: Pressed on how quickly China could close the canal, arguing the U.S. lacks a "ready response"2:18:052:18:30; argued the ability of a single vessel to disable the canal (as at Suez) means the U.S. effectively lacks operational control2:22:24.

Sen. Todd Young (R-IN)2:25:52: Noted 40% of U.S.-bound container traffic depends on the canal and Indiana manufacturers/farmers rely on stable shipping costs2:26:21; asked whether Congress or the FMC should use new legal tools against discriminatory toll practices2:26:43; asked about updating the treaty for modern Chinese-influence conditions2:29:03.

Key moments

Sola testified the Chinese-operated Panama Ports Company paid zero dollars in concession fees to Panama for 20 years, while the Port of Houston generates about $1 billion/year and Miami about $200 million0:54:40.

Sullivan got Kontorovich and Sola to agree that embedded Chinese spies or military personnel within the two Hutchison-run port companies would be a "clear violation" of Article Five's neutrality provisions1:23:171:23:54.

Sola disclosed that Chinese contractors house imported workers in guarded camps with barbed wire in Panama, saying "we really do not know who is in the camps"2:04:54.

Sola described his own family's Pacific-coast marina/cruise-port concession being nationalized under Belt and Road pressure and reassigned to a Chinese developer paid $300 million versus his planned $30 million project, adding it would take Panama 375 years to recoup the cost2:24:082:24:34.

Kontorovich testified the treaty was historically understood to permit either side to use armed force to enforce the neutrality regime, based on 1978 Senate ratification history0:58:16.

Sen. Kim directly challenged the framing that "China operates" the canal; Sola clarified the Panama Canal Authority operates it, though Hutchison Ports controls the two terminal ports under permits from the Authority1:49:021:50:38.

Sola said canal revenue jumped from $500 million to $1.8 billion over three years due to slot-auction fees, which he called "very concerning to us and for the Americans"1:36:46.

Maffei disclosed Hutchison Ports operates major terminals well beyond Panama — including the UK's largest container port and terminals in Argentina, Australia, and Greece — arguing narrow focus on Panama "misses the point"1:26:56.

Sheehy and Maffei sparred over vulnerability: Sheehy argued a single sabotaged vessel could close the canal with no U.S. response capability, concluding "we do not have operational control of the canal"2:22:24.

Sola testified Panama deflagged 53 Iranian sanctions-evading vessels after FMC pressure prompted a faster appeals process2:03:09.

Metadata

CommitteeSenate Commerce, Science, and Transportation
Chamber / CongressSenate · 119th Congress
Date2025-01-28
TypeMeeting
Witnesses
(none listed in event metadata)
Videosenate-isvp
Transcript395 caption blocks · 18,318 words · 2:38:35 runtime
EventCongress.gov 336559