CONTROLLING THE CANAL

December 1999
		Does handing over the Panama Canal pose national security dangers to the United States? William Ratliff of the Hoover Institution at Stanford University and John J. Tierney of The Institute of World Politics in Washington, D.C., respond to your questions.

Forum introduction Is the Panama Canal an American territory? Do Marxist movements in Latin America threaten the security of the canal? Can handing over the canal -- in a spirit of international peace -- increase security in the canal zone? What will the hand-over's economic impact be to Panama? How will the canal be run differently by Panama? Can the U.S. strengthen ties with Panama via free trade relations?   Online Special: The Panama Canal Dec. 13, 1999: An in-depth look at the Panama Canal and U.S. interests. Browse the NewsHour's coverage of Latin America.     The Hoover Institution The Institute of World Politics The Panama Canal Commission The U.S. State Department

David Klausa of Lake Geneva, WI, asks: How will the canal be run differently under the control of Panama?   William Ratliff responds: The canal will be run by the Panama Canal Authority consisting of eleven directors, ten of whom are chosen by the Panamanian president, nine requiring ratification by the legislature. The legislation itself provides some safeguards against abuse. The PCA will have exclusive charge of everything to do with the canal, though it can delegate some projects and services to third parties. In the notice of the PCA's formation, Article 5 says its "fundamental objective" is to maintain a canal that will "always remain open to the peaceful and uninterrupted transit of vessels from all nations of the world, without discrimination. . . ." But whereas the U.S. ran the canal as a public utility for the global community, pumping profits and sometime much more into maintaining the facility, Panama intends to run it as a business for profit. Panama's intention could be dangerous if it expects to make much from the canal itself since doing so would require either a significant hike in tolls or cutting corners in maintenance, or both. The former would drive users to seek more cost-effective alternatives while the danger of the latter, even in the medium term, is self-evident. Canal administrator Alberto Aleman Zubleta has acknowledged that canal profits come mainly from businesses made possible by the efficient operation of the waterway itself. For example, the canal is the reason Panama has become a center of international banking and shipping with a vast service sector that support much of the Panamanian population. If the waterway is not operated well, Panama could easily get less money from it than during the decades of U.S. control. Pride of ownership -- "Future Generations Will Be Proud of Us" says a billboard on the road to the Miraflores Locks -- may come at a cost Panamanians did not consider carefully in advance.   John J. Tierney responds: The immediate answer is that the Canal should NOT be "run differently." It should be run as well as the United States ran it since 1914, with efficiency, discipline, economic power and due regard for strategic considerations. Can we expect the same from Panama in the years ahead? The challenge is daunting. Panama must be able to replace the income from former U.S. military facilities with their thousands of well-paying jobs. It must sell billions of dollars worth of properties and find productive use for them, or otherwise pay millions each year for depleted property. Panama must maintain the Canal -- an 86-year-old facility -- through its own resources. It must reverse soil erosion around the Canal or face the possibility of serious water shortage and possible closure. Panama's government must guard against political patronage which could lead to inefficiency and instability. Improvements in the Canal and surrounding area will require millions, perhaps billions, of dollars. A sound investment climate is critical. Finally, without any military force, and with a token police, Panama must find a way to secure the Canal (and itself) against all kinds of threats: strategic, accidental, deliberate or irrational. There is no definitive answer to your question, but these are some of the dimensions of the problem.