Senate Committee Calls on FMC as it Explores Situation at the Panama Canal

The debate of the situation at the Panama Canal and the potential Chinese influence being detrimental to U.S. shipping interests moved to a U.S. Senate committee. A hearing on Tuesday, January 28, featured the newly appointed Chairman of the Federal Maritime Commission Louis Sola and now-Commissioner Daniel Maffei briefing the committee, as well as testimony from the CEO of the World Shipping Council and a law professor from George Mason University.

The Senate Committee on Commerce, Science and Transportation announced the hearing, saying the purpose was to examine the importance of the Panama Canal to the American economy and national security, as well as the concerns over capacity limitations and rising fees. It also highlighted the potential dangers posed by the involvement of China and other foreign powers. It was a follow-up after Donald Trump’s repeated assertions that U.S. shipping interests are being “treated badly” and that “China runs the canal.”

During the hearing that lasted more than two hours (complete video online), the committee in the now Republican-controlled Senate, echoed the issues voiced by Donald Trump. Senate Republicans raised concerns about Panama’s management of the canal, citing allegations of corruption, including a no-bid port concession awarded to the Chinese firm Hutchison Ports. They argued that Panama was violating the neutrality treaty signed when the U.S. turned over control of the canal.

Senator Ted Cruz of Texas and now chairman of the committee made assertions of “exorbitant fees” which he claimed violate the treaty. He reiterated the contention that Chinese companies control the ports and also cited a Chinese company as the builder of the new bridge crossing the canal saying they could use it to “block the canal without warning.” Other Republican senators cited the fact that in 2021 Chinese companies were given new 25-year concessions at the ports without bidding. Democrats injected into the discussion that SSA Marine, based in Settle, however, has also been active running the Manzanillo Terminal in Colon for the past 30 years.

During his prepared remarks, FMC Chairman Sola highlighted his personal experience with the Panama Canal including having transited the canal 110 times as a captain and earning the distinction of “Honorary Lead Pilot.” Sola told the committee, “For the past 25 years, the canal has been very ably administered by the Panama Canal Authority, a government entity that is separate from the government of Panama.”

Pressed by committee members, Sola refused to contradict Donald Trump, saying the president has “a different briefing book,” but at the same time reiterated that the canal is run by the authority, not the government. He said his experience showed it was being well run and he contradicted the assertions of Chinese control. Sola called the committee’s interest in the Panama Canal “commendable.”

Highlighting the split between the government and the canal authority, Sola acknowledged to the committee “the reputation the Government of Panama has for corruption and susceptibility to foreign influence.” He noted that Chinese overtures to the government began in 2015 saying the government was “receptive.” He asserted, “China only had to push lightly on a cracked door in Panama.”

Sola along with Maffei detailed that the FMC had heard concerns from U.S. importers and exporters noting that the situation at the canal had grown more severe due to diminished capacity during the worsening droughts. Maffei also referenced the “de facto closure of the Suez Canal” due to the Houthis saying it also had serious consequences for ocean shipping. Sola and Maffei traveled to Panama in July and August 2024 to look deeper into the cause of the issues.

“Panama Canal Authority executives appeared to be fully transparent in discussing the management of the canal and options for making the waterway more resilient against drought,” Sola told the committee. He however said the U.S. is “not without options in addressing the growing presence of China and Chinese companies in Panama.”

Sola called for increased U.S. support for American companies seeking to do business in Panama. He also said the U.S. must protect the independence of the Panama Canal Authority calling for building of expanding relationships with the authority. 

The FMC said it would also continue to monitor and review the practices of the Panama Canal Authority with “a particular eye toward the appropriateness of the pricing structure for transits.” Speaking earlier on CNBC, Sola noted the FMC could impose substantial fines on the Panama government or even bar Panama-flagged ships from U.S. ports.

Senator Maria Cantwell from Washington State - the ranking member on the committee representing the Democrats - also highlighted the need for U.S.-Panama cooperation to increase investment in port infrastructure and cybersecurity.

“It’s critical that the United States and Panama work cooperatively on new cyber security measures to close backdoors to foreign adversaries,” said Cantwell. “The United States and Panama should also work together to boost port and canal infrastructure to lower costs, and ensure reliability of the canal.”

Cantwell requested that the Department of Defense and U.S. Coast Guard brief the committee about foreign adversary threats to the canal. She also announced she would be leading a delegation to visit the canal’s operations.