Controversial canal transition unlikely to affect shipping

By Staff -- Logistics Management, 1/1/2000

Dec. 31, 1999, was a day loaded with significance: the end of the year, the end of the decade, the end of the 1900s ... and in the Republic of Panama, the end of the United States' control of the Panama Canal.

The handover of the canal's assets and operations seems unlikely to affect shippers directly, at least in the near term. The Panama Canal Authority has announced that vessel tolls will remain the same, at least for this year. That could change, though, because the authority will need to fund a massive expansion project that will include building a third set of locks and a series of dams. The controversial project would flood thousands of square miles of agricultural land and divert enormous amounts of water into the canal's Gatun Lake so it can accommodate additional ship traffic.

The canal's daily operations otherwise are expected to remain unchanged. The 1977 treaty provided for a 20-year transition that included training of local personnel and cooperation between U.S. managers and their Panamanian counterparts. The new canal administrator, Alberto Alemán Zubieta, is respected in both countries as an able and professional manager. Day-to-day operation of the canal, therefore, is simply not an issue, says William J. Adsett, general manager of CUPFSA, an exporter of fragrances located in Panama's Colón Free Zone. The real worry, he says, is the potential for politics to interfere in the business. "We know Panamanians can run [the canal] perfectly well. Our concern is can the Panamanian government run it well? ... You always have to question whether politics would seep into [the operations]."

Security and safety, meanwhile, have been a concern in both the United States and Panama. Last spring, Greenpeace activists got the government's attention when they boarded a vessel carrying radioactive waste as it transited the canal, with no interference from the canal's security forces. And Adsett worries that compliance with hazardous-cargo regulations may not be as strict now that hazmat transportation in the Canal Zone no longer falls under U.S. law and the U.S. Coast Guard's jurisdiction.

In the United States, security issues surrounding the handover are especially controversial. Some conservative lobbying groups accuse the United States of compromising national security by "abandoning" the canal and the military installations that surround it. They have charged that the U.S. military pullout will allow China to control ship traffic and use the canal area as a base for attacking the United States.

Their claims arose because Hutchison Whampoa, a Hong Kong-based shipping company with British roots, and Taiwan's Evergreen Line own concessions for operating container terminals at both ends of the canal. Adsett says that Panamanians are mystified by the U.S. groups' concerns. Not only do port operators have no influence over canal operations or security, but it would hardly be in the best interest of any Taiwanese or Hong Kong company to see Communist China in charge, he says. Furthermore, he notes, the most successful port at the mouth of the canal is Manzanillo International Terminal, a joint venture of Seattle-based Stevedoring Services of America and Panamanian importer Motores Internacionales S.A.

As a sign of its commitment to neutrality, the Panama Canal Authority has appointed an 11-member advisory board. Among the members are top executives from U.S., European, and Asian organizations, including Mobil Oil, the Port of New York/New Jersey, the U.S.-Panama Business Council, Maersk Line, and Evergreen Line. Furthermore, as C. Thomas Burke, former commissioner of the Panama Canal Study Commission, noted in his speech to the U.S.-Panama Friendship Conference in Washington last fall, the United States "retains the independent right to defend the canal."

Despite these reassurances that the "show will go on" just as it has in the past, shippers would be wise to monitor developments as the canal embarks on its ecologically sensitive expansion program. Any disruptions to service could well come from that corner, rather than on the operations front.