US Warships, Consumers Overpaying for Canal that America Built

WASHINGTON, D.C. – In his opening statement at today’s Senate Commerce Committee hearing titled “Fees and Foreign Influence: Examining the Panama Canal and Its Impact on U.S. Trade and National Security,” Chairman Ted Cruz (R-Texas) stressed the importance of the Panama Canal for the American economy and voiced concerns over China’s growing influence in the region. The Panama Canal facilitates 40 percent of U.S. seaborne container traffic and six percent of all global trade, but China has exploited Panama’s institutional weakness to evade U.S. sanctions and impose unfair charges on U.S. commerce and Naval ships.

Additionally, Sen. Cruz pointed out how one of the hearing’s witnesses, legal scholar Eugene Kontorovich, was unable to attend in person due to limited flights between the U.S. and Israel. Sen. Cruz noted that it is unacceptable for U.S. airlines not to have direct flights to our closest ally in the Middle East and pledged to continue pressing U.S. air carriers to resume service.

Here are Sen. Cruz’s remarks as prepared for delivery:

“Good morning.  The Senate Committee on Commerce, Science, and Transportation will come to order.  

“We are here today to examine a monument to American ingenuity: the Panama Canal.  

“Between the American construction of the Panama Railroad, the French effort to build an isthmus canal, and America’s triumphant completion of that canal, the major infrastructure projects across Panama cost more than 35,000 lives.  For the final decade of work on the Panama Canal, the United States spent nearly 400?million dollars (equivalent to more than $15?billion today).  

“The Panama Canal proved a truly invaluable asset, sparing both cargo ships and warships the long journey around South America.  When President Carter ceded it to Panama, Americans were puzzled.  With the passage of time, many have lost sight of the canal’s importance. 

“Not President Trump.  When he demanded fair treatment for American ships and goods, the media scoffed.  But the Panama Canal was not just given away: President Carter struck a bargain.  He made a treaty.  And President Trump is making a serious argument that treaty is being violated right now.  This Committee has jurisdiction under Senate rules over the Panama Canal, and today we will examine evidence of potential violations.  

“President Trump has highlighted two key issues: the danger of China exploiting or blocking passage through the canal, and the exorbitant costs for transit.  

“Chinese companies are building a bridge across the canal – at a slow pace so as to take nearly a decade – and control container ports at either end.  The partially-completed bridge gives China the ability to block the canal without warning, and the ports give China ready observation posts to time that action.  This situation poses acute risks to U.S. national security.

“Meanwhile, the high fees for canal transit disproportionately affect Americans, because U.S. cargo accounts for nearly three-quarters of canal transits.  U.S. Navy vessels pay additional fees that apply only to warships.  Canal profits regularly exceed $3?billion.  This money comes from both American taxpayers and consumers in the form of higher costs for goods.  American tourists aboard cruises, particularly those in the Caribbean Sea, are essentially captive to any fees Panama chooses to levy for canal transits, and they have paid unfair prices for fuel bunkering at terminals in Panama as a result of a government-granted monopoly.  

“Panama’s government relies on these exploitative fees.  Nearly one-tenth of its budget is paid for with canal profit.  As those fees cascade through the American economy and federal fisc, the Chinese Communist Party advances in its global economic contest against the United States and takes a militaristic interest in the canal.

“While President Trump has rightly focused on these key issues, there are additional problems. 

“In the last two years, the canal authority generated record revenue even while transits were depressed by drought conditions, and the only comfort to delayed and overcharged ships is that Panama may invest in more freshwater reserves in the future. 

“Even as it takes advantage of the global maritime system, Panama has emerged as a bad actor.  Panama has for years flagged dozens of vessels in the Iranian “ghost fleet,” which brought Iran tens of billions of dollars in oil profits to fund terror across the world. 

“And Chinese companies have won contracts, often without fair competition, as the infamous ‘Belt and Road Initiative’ has come to Panama.  China often engages in ‘debt-trap diplomacy’ to enable economic and political coercion.  In Panama, it also seems to have exploited simple corruption. 

“We have four panelists with us today.  At Ranking Member Cantwell’s request, we also invited the Deputy Administrator of the Panama Canal to appear today.  She declined that invitation.  I understand this witness claimed her absence was due to a scheduling matter, but I also recognize that defending the Panama Canal Authority is an unenviable task.  We may compel her testimony at a future hearing.

“It will not escape Senators’ notice that Professor Kontorovich is appearing virtually today.  He was ready to fly from Israel to D.C. to appear in person, but he was unable to because too few American carriers have resumed direct flights to Israel.  While European airlines are willing to fly into Israel, service to America has been prohibitively long and expensive.  Israel is America’s closest ally in the Middle East, and U.S. air carriers are refusing to fly there.  

“I find the situation unacceptable and have pressed airlines to resume flights.  I am a strong believer that private conversations should stay private, but I recently predicted that within 30 days we would see a return of U.S. flights to Israel.  Late last week, Delta Air Lines announced it would finally restart direct flights to Tel Aviv in April.  Some speculate United Airlines may announce direct flights in February.  I am hopeful this is the case.  However, I am disappointed American Airlines has not announced its intent to restart direct service to Israel.  I will continue to press until service is resumed.  

“Turning back to the topic at hand, I am grateful to President Trump for raising public awareness about the state of the Panama Canal and the threats to American interests.  We cannot afford to let American shippers be extorted.  We cannot turn a blind eye if Panama exploits an asset of vital commercial and military importance.  And we cannot stay idle while China is on the march in our hemisphere.  I expect the testimony today to enlighten us about these challenges.”

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