The Panama Canal Could Become the Center of the U.S.-China Trade War
Following outgoing president Juan Carlos Varela’s unexpected decision to end diplomatic relations with Taiwan in order to establish formal ties with Beijing in June 2017, a tidal wave of Chinese investment is in the works. Major infrastructure projects and an imminent free trade agreement will allow Panama, a country of 4 million people, to maximize its potential as a hub for regional trade, manufacturing, and logistics and ease the strain on a financial services industry damaged by the Panama Papers. In return, for a relatively modest outlay, China is poised to become the most important commercial partner in a country that controls a key chokepoint of world trade.
It’s a win-win, both sides like to stress. But if tensions between the United States and China continue to escalate, Panama could become a key theater in their trade war.
For the seven presidential candidates in the recent election—all but one of whom were center-right, pro-business free-traders—Chinese cash is required to reinvigorate a stalled economy. The geopolitical effects and the long-term effect on sovereignty? Those are problems for future presidents. Cortizo, speaking to Reuters on Election Day, said the United States needed to pay more attention to Central America, saying, “While they’re not paying attention, another one is making advances.”
And that, said Carlos Guevara Mann, an associate professor in political science at Florida State University’s Panama campus, has “put Panama in the midst of the world’s biggest geopolitical rivalry: the trade war between the U.S. and China. No one has a plan.”
But Panama, given the United States’ history in the country and the unique importance of the interoceanic canal, could be where the two powers collide.
Recently, China has deepened ties with governments across Latin America and the Caribbean, 19 of which have officially signed up for Chinese President Xi Jinping’s signature $1 trillion Belt and Road infrastructure plan. It has encountered little pushback or competition from the United States. But Panama, given the United States’ history in the country and the unique importance of the interoceanic canal, could be where the two powers collide.
“The Panama Canal was the great work of the industrial age, as symbolic to the U.S. as the Great Wall is to China,” said Richard Koster, a novelist and historian who has been an analyst of Panamanian politics since he first set foot on the isthmus as a Marine in 1957. “The Chinese plan to develop a permanent presence in Panama.”
The facts are China controls access via the tug boats, they could shut it down if they wanted too.