Donald Trump and Panama trade blows over control of canal

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Panama’s President José Raúl Mulino hit back at Donald Trump after the president-elect said he would demand the Panama Canal be “returned” to the US if the vital waterway was not operated to his liking.

Trump’s weekend salvo and the ensuing diplomatic feud offered a taste of his chaotic brand of international politics less than a month before he returns to the White House. The president-elect attacked the Central American country over what he considered excessive fees for maritime freight to use the canal, which is vital to the US economy.

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“I want to express precisely that every square metre of the Panama Canal and its adjacent area belong to PANAMA, and will continue to be. The sovereignty and independence of our country are not negotiable”, Mulino said in a statement on Sunday.

Trump said in a social media post on Saturday that “we will demand that the Panama Canal be returned to us” if the “principles, both moral and legal, of [the US’s] magnanimous gesture of giving are not followed”, adding that control of the canal was “foolishly” ceded to Panama 25 years ago.

“We’re being ripped off at the Panama Canal like we’re being ripped off everywhere else,” Trump told supporters at a conservative conference in Phoenix on Sunday. “The fees being charged by Panama are ridiculous, highly unfair.”

The US, which completed the canal 110 years ago, handed over full control to Panama in 1999, during Bill Clinton’s presidency, following a treaty negotiated in 1977 by then-president Jimmy Carter. “We built it. We’re the ones that use it. They gave it away,” Trump said of the Carter administration.

The Panama Canal is dominated by US traffic. Almost 75 per cent of its cargo goes to or from the US, according to the Panama Canal Authority. The waterway links the Atlantic and Pacific oceans, allowing ships to avoid a long voyage around South America.

About $270bn of global cargo passes through the canal every year, though the authority is struggling to persuade some shippers to return to the route after a drought reduced the number of ships that could use the waterway.

Lael Brainard, director of Joe Biden’s National Economic Council, said at a Brookings Institution speech on Thursday that reduced water levels in the canal had contributed to supply chain strains in recent years.

A centre-right former security minister, Mulino became president in May, having campaigned on boosting foreign investment and stagnant economic growth.

Mulino said the canal’s rates were not set on “a whim” but established based on market conditions and international competition, as well as its operating, maintenance and modernisation costs. He added that the trade route brought billions of dollars to the Panamanian economy.

In 2017, Panama severed diplomatic ties with Taiwan and established relations with China. Chinese investments in infrastructure and trade zones have made Beijing an important economic partner of Panama, with a Hong-Kong based company operating two of the ports at the ends of the canal.

Negotiations for a trade agreement between Panama and China began in 2018 but stalled. However, Julio Moltó, Panama’s minister of trade and industry, recently said discussions could resume in 2025.

Trump on Saturday wrote that the canal was not for China to manage and on Sunday claimed the canal was “falling into the wrong hands”.

Mulino said: “The Canal has no control, direct or indirect, neither from China, nor from the European Community, nor from the United States or any other power”.

On the campaign trail, Mulino emphasised relations with the US, offering co-operation on migration and promising to “close” the Darién Gap, a stretch of jungle between Panama and Colombia that record numbers of migrants have been crossing on their way to the US.