Explained: Why is Trump threatening to take control of the Panama Canal?

medium116653371His second term is yet to kick in. But US President-elect Donald Trump’s “America First” agenda is kicking up dust around the world already.After his tariff warnings against Canada and Europe, an offer to buy Greenland, and make Canada America’s 51st state, Trump on December 22 turned his focus on the Panama Canal as he threatened to reassert US control over the conduit — a man-made shortcut that connects the South Pacific Ocean with the North Atlantic Ocean.Trump accused Panama of charging excessive rates to use the Central American passage, drawing a sharp rebuke from Panamanian President Jose Raul Mulino.Speaking to a crowd of supporters in Arizona, Trump also said he would not let the canal fall into the “wrong hands”, warning of potential Chinese influence on the passage.After the event, he posted an image on Truth Social of an American flag flying over a narrow body of water, with the comment: “Welcome to the United States Canal!”But can the US take back the canal from Panama? What right does it have even to make that claim?Let’s go back a bit in history to answer these questions.What is Trump talking about?The US, more or less, built the canal, an 82-km waterway that helps ships bypass a longer route that goes around the southernmost tip of South America.One says more or less because it was the French who started building the waterway in 1881 but gave up midway in 1889 because of insurmountable technical hitches and an unacceptably high loss of human lives to accidents and illnesses.The US took over in 1904 and opened the canal in 1914. It was aimed at facilitating the transit of commercial and military vessels between the US coasts (see map). Washington relinquished control of the conduit to Panama on December 31, 1999, under a treaty signed in 1977 by President Jimmy Carter.It is this history of the US building, operating and then handing over the canal to Panama that Trump is referring to in his threat to take it back. medium116653397 medium116657597Why is the canal so important?Up to 14,000 ships cross the canal annually. It accounts for 2.5% of global seaborne trade and is critical to US imports of autos and other commercial goods by container ships from Asia, and for US exports of commodities, including liquefied natural gas.Cargo ships sailing between the east and west coasts of the US, which otherwise would be obliged to round Cape Horn in South America, shorten their voyage by about 12,000 km by using the canal.The canal reduces the travel time of the ships from two months to less than 30 days.By providing a shorter, relatively inexpensive passageway between the Pacific and the Atlantic oceans, the canal has influenced world trade patterns, spurred growth in developed countries, and has been a primary impetus for economic expansion in many remote areas of the world. For example, a vessel laden with coal sailing from the east coast of the US to Japan via the Panama Canal saves about 4,800 km versus the shortest alternative all-water route. Similarly, a vessel laden with bananas sailing from Ecuador to Europe can save about 8,000 km. medium nocaptionhttp://youtu.be/SK_CNbv1bis?si=QSdOUXhcg8bpsVTYWhy taking back the canal is easier said than doneTrump’s comments were an exceedingly rare example of a US leader saying he could push a sovereign country to hand over territory.The canal is vital to Panama’s economy, contributing about 20% of its revenues.It is not clear how Trump would seek to regain control over the passage. He would have no recourse under international law if he decided to make a play for the canal.This is not the first time Trump has openly considered territorial expansion.In recent weeks, he has repeatedly mused about turning Canada into a US state, though it is unclear how serious he is about the matter. During his first term and again recently, Trump expressed interest in buying Greenland, an autonomous territory of Denmark.He was publicly rebuffed by Danish authorities before any conversations could take place.Is high passage toll charged by Panama Canal an issue too?It is. Trump, in fact, threatened to reassert US control over the Panama Canal if Panama does not cut transit fees.The Panama Canal charges a considerably high passage fee -- a ship usually pays $400,000 (Rs 3.4 crore) to use the route.Last year, a shipping company reportedly shelled out an additional $2.4 million as priority passage fee, which is paid to jump the queue at the canal, sometimes running into weeks A toll of $375,600 was reportedly paid by a cruise ship named Norwegian Pearl on April 14, 2010.Swimmer Richard Halliburton paid 36 cents to swim through the canal in 1928.President Mulino, of course, has defended the passage fee, saying it is not set “on a whim”. medium116653443Does China have any influence over the canal?In a recorded message, Mulino hit back at Trump, saying that Panama’s independence was non-negotiable and that China had no influence over the canal’s administration.China does not control or administer the canal, but a subsidiary of Hong Kong-based CK Hutchison Holdings has for long managed two ports located on the canal’s Caribbean and Pacific entrances.“Every square metre of the Panama Canal and the surrounding area belongs to Panama and will continue belonging [to Panama],” Mulino said in his statement, which was released on X.Trump then responded to Mulino: “We’ll see about that!”China has backed Mulino’s assertion of his country’s sovereignty over the Panama Canal.“The Panama Canal is a great creation of the people of Panama. It is a golden waterway for connectivity among countries... China will as always respect Panama’s sovereignty over the canal and recognise the canal as a permanently neutral international waterway,” Chinese foreign ministry spokesperson Mao Ning said. medium116653418Did the 2023 ‘traffic jam’ lead to higher passage fees?In August last year, more than 200 ships were stranded on either side of the waterway in what was the worst traffic jam ever. The congestion was due to a combination of factors, including a prolonged drought that reduced water levels in the canal, as well as operational changes implemented by the Panama Canal Authority (ACP) to conserve water.The canal is fed by rainwater and runoff from the surrounding mountains, but the rainy season had been below average for the previous two years. This had led to a significant drop in water levels in the canal, which forced the ACP to reduce the number of ships that can pass through each day.The ACP has also implemented a number of operational changes to conserve water. These include reducing the amount of water used to flush the canal, and requiring ships to travel at slower speeds. These changes further reduced the canal’s capacity, and contributed to the traffic jam.Later, the ACP extended the restrictions on vessel transit through the canal until September 2. The maximum number of authorised daily vessel passages was capped at 32.With fewer ships, administrators also increased the fees that shippers are charged to reserve slots to use the canal.With inputs from agencies