| Speaker | Time | Text |
|---|---|---|
| I am pleased to appoint the following member to the Commission on Reform Modernization of the Department of State, the Honorable Mike Quigley of Illinois. | ||
| Thank you for your attention to this appointment. | ||
| Signed sincerely, Hakeem Jeffries, Democratic Leader. | ||
| The Honorable the Speaker, House of Representatives, sir, pursuant to 10 United States Code 9455A, I am pleased to appoint the Honorable Don Davis of North Carolina to the Board of Visitors to United States Air Force Academy. | ||
| Thank you for your attention to this matter. | ||
| Signed sincerely, Hakeem Jeffries, Democratic Leader. | ||
| The Honorable the Speaker, House of Representatives, sir, pursuant to 10 United States Code 4355A, I am pleased to appoint the Honorable Patrick Ryan of New York to the Board of Visitors to the United States Military Academy. | ||
| Thank you for your attention to this matter. | ||
| Signed sincerely, Hakeem Jeffries, Democratic Leader. | ||
| The Honorable the Speaker, House of Representatives, sir, pursuant to 10 United States Code 8468A, I am pleased to appoint the Honorable Sarah Elfrith of Maryland to the Board of Visitors, United States Naval Academy. | ||
| Thank you for your attention to this matter. | ||
| Signed sincerely, Hakeem Jeffries, Democratic Leader. | ||
| Pursuant to clause 13 of Rule 1, the House stands adjourned until 10 a.m. on Friday, January 31st, 2025. | ||
|
unidentified
|
Wrapping up this brief session today in the U.S. House, members are currently in a district work period with the next legislative session taking place on Tuesday, February 4th. | |
| Watch live coverage of the House when members return here, of course, on C-SPAN. | ||
| And we take you back live now to the Senate Commerce Committee hearing on the Panama Canal. | ||
| Walking up to the idea of a suicide pact because we got two big Chinese companies on both ends of the Panama Canal who, if there's a war in Indo-PayCom, Taiwan that involves us in China, these companies would be obligated to do the bidding of the Chinese Communist Party and PLA. | ||
| I mean, isn't that, aren't we kind of walking up to a very significant national security threat already? | ||
| Yeah, certainly there's a threat, and I think what makes the action of the Chinese government sort of difficult to respond to, but important to respond to, is that they conceal this in sort of levels of gray, right, without direct control. | ||
| Well, let me ask you on that topic. | ||
| It's my last question, Professor. | ||
| Let's assume that we find out, and again, it wouldn't be surprising, I think you can almost assume it, that these two companies have Chinese spies or military officials within the ranks of the employees of the companies. | ||
| Let's assume we found that out. | ||
| Somehow that becomes public. | ||
| But I don't think it's a big assumption. | ||
| It's probably true right now. | ||
| So you have spies and military personnel within the ranks of these two companies that are controlling both ends of the Panama Canal. | ||
| For you, Professor and Chairman Sola, wouldn't that be a blatant violation of Article 5 of the Neutrality Treaty if that were true, which probably is true? | ||
| What's your reason? | ||
| I do think it would be a clear violation. | ||
| As Dean Rusk, former Secretary of State, Dean Rosk said at the ratification hearings, informal forces can violate Article 5 as well as formal forces. | ||
| And Chairman Sola, do you agree with that? | ||
| Is there any evidence of Chinese spies or other nefarious Chinese actors embedded in these companies? | ||
|
unidentified
|
Senator, we have no information of that. | |
| That's not under the purview of the fire. | ||
| Do you agree that would be a violation of Article 5 of the Neutrality Treaty? | ||
|
unidentified
|
I do. | |
| Thank you. | ||
| Thank you, Mr. Chairman. | ||
| Thank you. | ||
| Senator Baldwin. | ||
| Thank you. | ||
| Commissioner McFay, good to see you. | ||
| Thank you for being here today. | ||
| I am very concerned about China's large and growing influence in the world's infrastructure network. | ||
| A company from Hong Kong operates two ports in the Panama Canal, one on each end. | ||
| And while the company is not Chinese state-owned, it is subject to China's national intelligence law, as we've been discussing. | ||
| Moreover, a Chinese state-owned entity is currently building a bridge over the Panama Canal. | ||
| But the Panama Canal is just one example of how far China's influence stretches. | ||
| Their dominance in maritime, logistics, and shipbuilding sectors lessens competition, creates supply chain risks, and creates opportunities for surveillance and information gathering. | ||
| In order to facilitate the movement of goods throughout the world, it's essential to have a secure and level playing field, which we currently don't. | ||
| Chinese current practices do not allow for that. | ||
| The United States Trade Representative recently investigated China's practices in the commercial shipbuilding sector under Section 301 and recently concluded that their dominance is a burden to United States commerce. | ||
| A few decades back, we were the dominant country in commercial shipbuilding. | ||
| Last or in 2023, we built five commercial ships and China built over 1,700 according to that investigation. | ||
| So what policies would you recommend to prioritize growth of the United States' influence in the maritime and logistics sector to compete with China and level the playing field? | ||
|
unidentified
|
Answer in less than a minute. | |
| Yep. | ||
| Senator Baldwin, it's very good to see you again. | ||
| And we were colleagues for one term in the House, and I appreciate that. | ||
| I think the best I can answer in a short term is to amen to everything you said. | ||
| And as an illustration, Senator Sullivan was talking about Hutchinson Ports. | ||
| That's actually the same company that runs terminals on both ends of the canal. | ||
| I am concerned about that. | ||
| However, if we want to be concerned about that, all of us should lose a lot more sleep than we're losing. | ||
| Because if that, if there's spies there, then there might be spies at other Hutchinson ports. | ||
| And there are other Hutchinson ports in almost every part of the world. | ||
| They own the largest container port in the United Kingdom, Felixdale, which is responsible for nearly half of Britain's container trade. | ||
| They control major maritime terminals in Argentina, Australia, the Bahamas, Germany, Indonesia, Mexico, Myanmar, the Netherlands, South Korea, and Tanzania. | ||
| If owning and managing adjacent ports means that China somehow has operational control or strategic control over the Panama Canal, they also have it over the Suez, the Singapore Straits, the Mediterranean Sea, and the English Channel. | ||
| That's just one aspect of what you were talking about. | ||
| That doesn't include the shipbuilding, heavily subsidized, such that now I believe over half of new ships that are in the companies that belong to the World Shipping Council are coming from China, not because these are bad companies, but because they're undercutting other things. | ||
| And it's a problem that has been going on for 20 years, which makes it very difficult to answer your question. | ||
| It is a long answer. | ||
| This is not a problem that occurred last week. | ||
| This is not something that President Trump identified. | ||
| This was going on all of President Biden's term, but all of President Trump's first term. | ||
| It has been going on for decades and decades through both U.S. Republicans and Democrats as president. | ||
| The only thing I can say is I echo what Ranking Member Cantwell said, and I think others of both parties have echoed it, that we need some sort of overall maritime strategy. | ||
| We have to acknowledge that this is part of our national security, that economic resilience is extraordinarily important. | ||
| And I believe this is the greatest country in the world. | ||
| I think if we start countering some of these efforts, we can do it. | ||
| But it has to become a national priority. | ||
| And part of the challenges we're talking about outside the borders of our U.S. investing outside the borders of our U.S. does not make a very good campaign ad, but it may be necessary to secure, particularly with such an aggressive and frankly on this open strategy that China has had. | ||
| I thank you for that answer. | ||
| I know my time is now short. | ||
| I will allow Professor Kantorovich to answer this for the record. | ||
| But Professor, I'd like to ask for your help in finding productive actions we can take to overcome some of the challenges that are being discussed today. | ||
| I'm confident that we can find bipartisan solutions to pursue. | ||
| It is my view that we should strengthen our relationship with Panama through mutually beneficial actions. | ||
| For one, we should have a fully staffed embassy. | ||
| The United States went without an ambassador to Panama from 2018 to 2022, largely due to partisan gridlock in the Senate confirmation process. | ||
| So, what additional strategies would you suggest the U.S. pursue to encourage Panama to enhance its security relationship with us, the United States of America, rather than China? | ||
| And how can we leverage the strength of the American private sector to encourage more investment in the important infrastructure projects where China currently has a strong presence, in fact, dominance? | ||
| So, thank you. | ||
| So, my understanding of the Chinese advantage is that to the extent that they're willing to use their government wealth to consistently underbid contracts, they have an advantage that can't be beat. | ||
| And thus, leaving these kinds of issues to contracting is going to put American companies perpetually at a disadvantage. | ||
| You know, I think one potential action would be to make clear to Panama that based on these changes that have occurred over the years, increasing Chinese control over Hong Kong, the passage of the national security law, the Belt and Road Initiative, the military-civilian integration doctrine of China, that contracts with Chinese-based companies are considered suspect and incompatible with the neutrality regime of the treaty. | ||
| That would at least give American companies and other truly private companies a fighting chance. | ||
| Thank you. | ||
| Senator Blackburn. | ||
|
unidentified
|
Thank you, Mr. Chairman. | |
| Yes or no, quickly for the three of you, just for the record: is the China investment into the Panama Canal a direct threat to U.S. national security? | ||
|
unidentified
|
Yes or no? | |
| Mr. Solos, start with you, down the panel. | ||
| Thank you. | ||
| I don't have that information as an Industry Trade Association senator. | ||
| Okay. | ||
| All right. | ||
| And we've talked some about the neutrality treaty, which I think is of concern to all of us. | ||
| And as I have looked at this, and I appreciated Senator Sullivan's questioning on this, we look at how President Trump is going to push forward with getting this issue addressed. | ||
|
unidentified
|
And we have heard a good bit about this from our shippers that are looking at what happens coming out of the port of Memphis. | |
| And I think that the government of Colombia learned a lesson last week that we are not going to go soft on some of these issues. | ||
| And when you look at the fact that the U.S. is a primary user, it is the primary user of the Panama Canal. | ||
| And we are also Panama's largest provider of direct foreign investment. | ||
|
unidentified
|
I think those two things should be significant. | |
| Our foreign investment into Panama is $3.8 billion annually. | ||
|
unidentified
|
This is why people are looking at this issue. | |
| So, Professor, let me come to you on this, and we thank you for joining us remotely. | ||
| Shouldn't our investment in Panama be contingent on their adherence to that neutrality committee, ensuring that Panama and Panama alone would control that canal? | ||
| Certainly, that is an action we can take to enforce the treaty and to enforce our understanding of the treaty. | ||
| That's an action we can take even without the treaty. | ||
| So, to the extent that the United States considers the Chinese operation of facilities around the canal to be against its interests, it can certainly condition aid and economic relationships on the exclusion of China. | ||
| Now, the United States has typically not worked that way, and that may be one of the reasons why, as we heard in the testimony, China has basically made inroads everywhere. | ||
| But for that, we don't even need the treaty. | ||
| Certainly, if we consider the treaty to be violated, measures like that far short of the armed force authorized by the treaty would be reasonable. | ||
| Professor, let me interrupt you there because I do want to move on. | ||
| I think that as you look at how China has used the Belt and Road Initiative, and we have talked some about that this morning, we know that they have pushed the digital yuan. | ||
| And I am concerned that given their control over much of that infrastructure around the canal, they would attempt to force U.S. shippers or our allies to bypass the dollar and use the digital yuan as they are in other countries where they are practicing debt diplomacy and where they are expanding the Belt and Road initiative. | ||
| So, Chairman Sola, could you speak for a moment about the potential for fee manipulation with the CCP? | ||
| Because, as I mentioned, we are hearing a good bit about that. | ||
| We are hearing that the toll structure disadvantages U.S. companies, that the Canal Authority has begun charging millions of dollars to skip the queue. | ||
| And these fees put many bulk shippers in an adverse position. | ||
| And these bulk shippers have a huge impact on ports along the lower Mississippi River. | ||
|
unidentified
|
And, you know, these exorbitant fees are there unless you're going to face delays at the canal. | |
| And then the impact of hearing these Chinese companies would preference the yuan as opposed to the dollar. | ||
|
unidentified
|
Thank you, Senator. | |
| The fees that I think we are looking at, or we have been looked at, the reason that we went there was because of the auctioning of the slots. | ||
| And so what Panama did is they had a smaller percentage, maybe 20 percent allocation, and then they moved it up to 30 percent and 40 percent because it became a money maker for them. | ||
| So as they were doing. | ||
| Okay, and let's let me interject here. | ||
| The auctioning of the slots gives these the right to skip the queue. | ||
|
unidentified
|
Yes, ma'am. | |
| Okay, so just for the record there, continue. | ||
| So the auctioning of the slot, under maritime law, it's first come, first served, but Panama has always put a certain percentage aside. | ||
| And they started to put more and more. | ||
| So we got a lot of complaints. | ||
| We got a lot of complaints from LNG carriers that paid $4 million to go through. | ||
| And we got a lot of complaints from agriculture that didn't have the money to pay to go through because their goods were going to go down. | ||
| So if you look at the financial statements, I'm a nerd. | ||
| I look at financial statements of everybody. | ||
| But the canal increased the amount of revenue that they had from about $500 million to $1.8 billion in the last three years just because of those fees. | ||
| So this is what is very concerned to us and for the American shippers. | ||
| And have you seen a tendency to preference the digital yuan over the dollar? | ||
|
unidentified
|
I have heard of the digital yuan and I've also heard of it used in international shipping as a currency. | |
| It is something that I would say that we have an eye on because we have a digital shipping exchange rule coming up. | ||
| But we will keep monitoring it. | ||
| Okay. | ||
| Thank you, Mr. Chairman. | ||
| Thank you. | ||
| Senator Klobuchar. | ||
| Thank you very much, Mr. Chairman. | ||
| And I can't help but think as we debate this issue of the Panama Canal, while it is important, if you want to look at what's happening right now, as in the middle of the night last night when an executive order was issued by, well, not an executive order, just a memo by the acting budget director, | ||
| which put a pause on all federal funding for not only NIH research of cancer trials and not only Head Start and people are in a panic in calling our offices, it's also a severe problem for trade and America's innovation. | ||
| Freezing all federal funding already granted to improve port and freight infrastructure through the port infrastructure program seems to me a major problem we should be addressing if we're talking about America's shipping interests. | ||
| But I will go to the topic at hand. | ||
| The Panama Canal is a critical trade corridor that allows for American farmers, other businesses to reach international customers. | ||
| I care a lot about this shipping issue. | ||
| As many of you know, Senator Thune and I joined forces two years ago to pass a very important bill that took on the international shippers in terms of giving more power to the Maritime Commission in taking on the rates they were charging businesses and farmers and manufacturers in America. | ||
| And it actually immediately had an impact because they knew what was coming their way and continues to. | ||
| I'll get to that in a minute. | ||
| But I do want to raise with you, Commissioner McFay, do you know of any instances where the United States has been singled out or treated unfairly under the neutrality treaty in the operation of the canal? | ||
|
unidentified
|
I do not. | |
| I would add that one of the reasons why saying the U.S. is disproportionately affected by raises in canal fees and other kinds of fees at the canal is because the United States disproportionately utilizes the canal. | ||
| Right. | ||
| And that is something that would affect the total number of fees. | ||
| And we know it is a critical, critical trade corridor and want to continue to use that corridor and be treated in a fair way. | ||
| But I do think one of the things that hasn't been brought out as we look at the periods of congestion or reduced capacity at the canal, which we know have occurred, like we saw with last year's drought, can delay shipments, increase transportation costs, potentially leading to higher consumer prices. | ||
| Commissioner, what steps can be taken to minimize disruptions and prevent cascading costs for consumers during periods of operational strain? | ||
|
unidentified
|
At the Panama Canal. | |
| Yes. | ||
| I mean, the main thing is that companies, importers and exporters need to make sure that they have very resilient supply chains. | ||
| Depending on any one sea lane is awfully risky in this very, very difficult to predict world. | ||
| It's one of the reasons why the Panama Canal is so important. | ||
| In fact, it may be a bigger reason than a particular transit or line transit is the fact that it is there in case something goes wrong on the other end of the world, say, for instance, the Suez Canal, right? | ||
| And it's that lack of redundancy right now that has been a big problem and, frankly, one of the reasons why shipping costs have gone up, because if you have to go all the way around Africa or go all the way around the Americas, you are taking steer ships. | ||
| Thank you. | ||
| Mr. Cromick, in your testimony, you described how drought reduced imports at U.S. ports. | ||
| Do these reductions affect prices for American consumers, or could they? | ||
|
unidentified
|
Yes. | |
| Okay. | ||
| Thank you. | ||
| I love that short answer. | ||
| Ocean Reform Act, I mentioned back to you, Commissioner. | ||
| Has that law improved the ability of shippers to have unreasonable charges waived or refunded by ocean carriers? | ||
| As we know, this has been a major problem for our carriers, which can translate into prices. | ||
| And talk about how it has empowered shippers to file complaints against unreasonable practices by the carriers. | ||
| By the shippers, of course, you know what I mean. | ||
| I don't mean the carriers themselves. | ||
| I mean the people that are trying to do business and sell their stuff. | ||
|
unidentified
|
American exporters, American importers. | |
| American exporters. | ||
|
unidentified
|
Absolutely. | |
| Look, I don't have a lot of time, but yes, it has had a tremendous effect. | ||
| We have seen instances of waiving or forgiving detention to merge fees or even refunding go way up. | ||
| We have seen settlements go up with the major carriers. | ||
| We have seen a lot more cases filed. | ||
| So many, in fact, that we have had to take, we have had one, used to have one administrative law judge, now we have three and they still have too many cases. | ||
| So a huge impact. | ||
| And are you concerned? | ||
| I'll just end where I started. | ||
| Are you concerned about freezing funding that has already been granted for port and infrastructure improvement right now, given what we are trying to do with American ports so we can make stuff here and ship it instead of having it all come to us? | ||
|
unidentified
|
That is a complicated question. | |
| I will just say at the Federal Maritime Commission, we try to do an awful lot with less. | ||
| As the New York Times reporter has pointed out, we are funded at approximately our entire annual budget, about one hour of the container ship industry's profits during the COVID pandemic. | ||
| Because of that legislation and subsequent appropriations, that is more like 68 minutes now. | ||
| It is still a fraction of it. | ||
| I don't know where, and I don't believe that. | ||
| Well, of course, we only found this out 12 hours ago at midnight from an unknown bureaucrat. | ||
| So our hope is that we will be able to give you those numbers to show what will happen to infrastructure if we simply freeze funding for all of these things across America. | ||
| Thank you. | ||
| Thank you. | ||
| Senator Buddh. | ||
|
unidentified
|
Thank you, Mr. Chairman. | |
| Again, thank the panel for being here. | ||
| It is good to see you all. | ||
| Mr. Sola, the November 2024 report from the U.S.-China Economic and Security Review Commission, it details China's efforts to deepen ties with countries across Latin America and the Caribbean. | ||
| So, Mr. Chairman, I would like to ask unanimous consent to enter that report into the record, Mr. Chairman, if that is okay. | ||
| Without objection. | ||
| Okay. | ||
| All right. | ||
| Thank you. | ||
| All right. | ||
| I think it's important to view the Chinese Communist Party's CCP activities in the Panama Canal Zone in the context of CCP's broader efforts to further access Latin America's markets and obstruct American interest in our own backyard. | ||
| Mr. Sola, would you agree with that, that you see the CCP activity hopefully to interrupt America's interest in the region? | ||
| Definitely an economic interest, Senator. | ||
| I was able to travel there a few years ago to see this firsthand and see the CCP's encroachment. | ||
| So, in your experience, are there noticeable differences in port operations when they are controlled by Chinese companies and financed or backed by Chinese loans? | ||
| And if so, would you explain that? | ||
| We have a wonderful example because we have a U.S. port there, SSA, out of Washington State. | ||
| I actually worked on the development of that many years ago and helped develop that. | ||
| That used to be a former United States Navy submarine base, and we converted that. | ||
| As far as the two ports that we have, they are completely different. | ||
| We have one as a major infrastructure footprint and also a container port that is moving 4 million containers a year. | ||
| That is almost, I mean, that's really a phenomenal amount. | ||
| That's more than Miami, Fort Lauderdale, and you probably got to get Tampa and a little bit of Jacksonville in there to get that type of volume. | ||
| And on the other side, we have a very small port, but it's a very strategic port on the Atlantic. | ||
| So, how are the operations done? | ||
| I don't know how they don't make money. | ||
| I mean, if you want to come to right down to it, is if they've been operating the port for 20 years and they say that they haven't made any money, so they haven't been able to pay the government. | ||
| That's what concerns me, is I don't believe that we are on a level playing field with the American port. | ||
| I appreciate that. | ||
| Mr. Kramick, what would be the consequences for U.S. trade and for the U.S. economy if access to the canal was suddenly revoked or significantly decreased for U.S. shippers? | ||
| It would be pretty catastrophic, Senator. | ||
| And we have a good example. | ||
| I mean, we have experienced that with the denial of the Red Sea right now, being able to use that. | ||
| And as Chairman Muffet said, having to go around the continent of Africa, 40 percent longer voyages, significant more costs and crew, maintenance, fuel, and even emissions. | ||
| Do you have a ballpark of the difference if they are able to transit the canal versus go around South America? | ||
| I don't have a figure. | ||
| I can tell you it in days, and it depends. | ||
| So, it is about 30 days if you can go through the canal, about 40 days right now, because we can't use the Suez Canal if you want to go and go from, say, Asia cargo going to U.S. East Coast. | ||
| Thank you. | ||
| Mr. Sola, another question. | ||
| China is pouring billions of dollars into infrastructure projects all over Central and South America. | ||
| And one example is in Ecuador. | ||
| China made a deal with them to fund a $3.4 billion hydroelectric dam. | ||
| There are 17,000 cracks already, and there is a lot of corruption. | ||
| Ecuadorian officials, they have been imprisoned, sentenced on bribery charges. | ||
| Using that as an example for the region, You know, the strategy of China is clear, to just take, and this is in the words of an Ecuadorian minister, the strategy of China is clear that they want to take economic control of countries. | ||
| In Panama, for instance, it is about 7.7 percent of their GDP, as I understand it. | ||
| So, using Ecuador as an example, should Congress be concerned that China could extract significant leverage over Panama, given the outsized role and revenue from the canal that it plays in their finances? | ||
| Did you turn your microphone? | ||
| Yes, Senator, it very well could. | ||
| And I believe that we are in a very fortunate position now with Secretary Rubio, who knows the area very well and also knows China. | ||
| Thank you very much, Mr. Chairman. | ||
| Senator, can I just say you should also look at the port of Chansei in Peru? | ||
| It will fit that pattern. | ||
| Thank you very much of Chinese investment. | ||
| Thank you. | ||
| Thank you. | ||
| Senator Kim. | ||
|
unidentified
|
Thank you, Chairman. | |
| Thank you to all of you for coming on out here. | ||
| I will be honest with you: when I talk to some of my constituents in New Jersey about this, they mostly understand this issue right now because of the words of President Trump. | ||
| So, if you don't mind, I just kind of want to start there and work backwards. | ||
| So, Chairman Sola, you know, President Trump said, quote, China is operating the Panama Canal. | ||
| We didn't give it to China, we gave it to Panama, and we are taking it back. | ||
| I guess I just wanted your assessment there. | ||
| Is China operating the Panama Canal? | ||
| Chairman, I mean, Senator Kim, I never discredit anything that President Trump says. | ||
| He has a different briefing book than I do. | ||
| What I can say is that the Panama Canal is operated, as far as I know, by the ACP, the Panama Canal Authority, and they are very efficient at operating the canal on the throughput that they are able to do. | ||
| So, you are saying, from your knowledge, you don't know of reasoning to believe that China is operating the Panama Canal, from the knowledge that you have. | ||
| From the knowledge that I have on whether the Senator, what we have here is the Panama Canal Authority is the authority where people will pay into the Panama Canal. | ||
| I think that what, if you will allow me to, if a company is able to operate both ports. | ||
| Oh, I see what you are. | ||
| So, you are talking about Hutchinson ports, right? | ||
| Yes. | ||
| So, we are talking about Balboa and Crystal Ball ports, right? | ||
| Right. | ||
| And they are subsidized. | ||
| They are subsidized. | ||
| They are subsidized. | ||
| I guess my question to you is: does Hutchinson port actually control the locks of the canal? | ||
| No. | ||
| Does it control directly the entrance to the canal? | ||
| Both ports are in operational control of the canal. | ||
| In order for those ports to operate, the canal has to give them a special permit. | ||
| And the reason is because when they are bringing a ship in or bringing a ship out, they block the traffic of the canal every single time. | ||
| I see. | ||
| So they have to have pilots. | ||
| So pilots. | ||
| But is Balboa or Crystal Ball ports under the jurisdiction of the Panama Canal Authority? | ||
| They have been given by the Panama government the concessions. | ||
| However, they are in the operational range of the Panama Canal. | ||
| Does that make those two ports under the jurisdiction of the treaty? | ||
| Let me say this, because I was in Panama when the treaty, when the Panama Canal was turned over. | ||
| We didn't just give back the Panama Canal. | ||
| We also gave back all the land and all the water on the entryway to it, and including what we had was a lot of military bases along there. | ||
| So as soon as you come out of the Panama Canal, and I invite you to come there, I will be able to. | ||
| I would love to come. | ||
| As soon as you come out of the locks, you run into Corazol, which was a former military base. | ||
| Corozol is run not by Panama, by the Panama Canal Authority. | ||
| It's run by the Panama government. | ||
| After you pass that, you run into the port of Balboa. | ||
| So, what I'm trying to say is that when we talk about the Panama Canal Authority, they operate only where the ships go up and go down and come out. | ||
| After that, you have where the pilots will take you on the boat and take you off. | ||
| So, is it operational control, the Panama Canal? | ||
| Yes, because the pilots are the ones that have to bring you in there and bring you out. | ||
| And again, every time a ship goes into one of those ports, they block the traffic of the Panama Canal. | ||
| Yeah. | ||
| Well, look, I guess I wanted to just ask you kind of directly then, what is your assessment of the Panama Canal's authority, you know, in terms of their ability to administer the canal? | ||
| I think the Panama Canal Authority and their independences, if you read my opening statement and my written statement, they've done a fantastic job. | ||
| And Panama has been running the canal for 25 years. | ||
| They've given $28 billion to the coffers of the government in those 25 years. | ||
| In the 25 years that the two ports that we call two ports, they've contributed zero. | ||
| So I don't understand why Panama would allow those two ports to operate and take and put into jeopardy what they have, the operations that they do have in the canal. | ||
| I want to just end here on this because I thought you had a really poignant point in your written testimony where you said we must protect the independence of the Panama Canal Authority. | ||
| Any efforts by other interests in Panama to diminish the independence of professionalism of the authority must be stopped. | ||
| And I would just venture to say, as we talk about this as a committee, as a government, that we should try to follow those same words as well. | ||
| You know, we try to have nuance and precision with the words that we use. | ||
|
unidentified
|
Otherwise, it very much looks like some of what we talk about is going to be perceived as undermining the Panama Canal Authority. | |
| And you said that you warned that that would be something that would actually boost up China's capacity in the region. | ||
| So I just ask, as we deal with this going forward, that we be precise about it and try to make sure we're talking about exactly what we're addressing. | ||
|
unidentified
|
And specifically, what I was talking about is the board of directors of the Panama Canal. | |
| I mean, are some of the board of directors on the board of directors of the ports that we have in question? | ||
| So when you look at the annual report of those two ports, they have a hidden or not a hidden, it basically says that they have local partners that are not identified. | ||
| So I believe that if we had those identified, we would know more. | ||
| Yeah, and more precision there. | ||
| Thank you so much. | ||
| I yield back, Mr. Chair. | ||
| Thank you. | ||
| Senator Schmidt. | ||
| Thank you, Mr. Chairman. | ||
| I want the committee to just imagine that Taiwan is under siege. | ||
| The CCP, determined to crush Taiwan's resistance and prevent a U.S. response, activates a multi-pronged strategy, leveraging its control over global ports and shipping infrastructure. | ||
| At the Panama Canal, one of America's most vital trade arteries handling 40 percent of U.S. container traffic, Chinese-controlled ports at both ends suddenly close. | ||
| Ships carrying food, oil, and military supplies are turned away because of technical difficulties, paralyzing the global economy. | ||
| Gasoline prices soar, supermarket shelves empty, and supply chains collapse within days. | ||
| China's state-owned ZPMC, which supplies 80 percent of U.S. port cranes, has equipped their cranes with cellular modems that create explosive vulnerabilities, exploitable vulnerabilities. | ||
| These cranes at U.S. ports mysteriously malfunction, halting critical operations. | ||
| Factories close, millions lose their jobs, and the economy grinds to a halt. | ||
| While this scenario may seem hypothetical, it is entirely plausible. | ||
| Therefore, the canal must remain neutral, and the U.S. must ensure the CCP does not encroach on our vital economic and national security interests. | ||
| In 2017, Senators Markey, Schatz, and Rubio urged President Trump to address China's aggressive maritime actions. | ||
| Their warnings apply today as China's growing control over critical infrastructure, ports, and strategic waterways like the Panama Canal pose an unacceptable threat. | ||
| America is sleepwalking into a carefully laid Chinese trap. | ||
| And fortunately, people like President Trump aren't falling for it. | ||
| I'm glad he's raised this issue. | ||
| This dangerous complacency must end. | ||
| That's why last week I introduced a Senate resolution to safeguard the Panama Canal from Chinese influence. | ||
| It calls on Panama to expel Chinese entities in foreign control and honor its neutrality under the 1977 transfer agreement. | ||
| The cost of inaction is too great. | ||
| I'll offer this up for anyone, but I think the biggest concern here is this Belt and Road initiative, we've talked about it creating a debt trap, which is true. | ||
| And building a bridge in Bangladesh is very different than this. | ||
| I mean, there are reports of the CCP building airports, and then when people are critical of the CCP, all of a sudden flights are canceled. | ||
| Controlling a grid, they can turn it off and they can turn it off. | ||
| And there's just no way on God's green earth that China can control the Panama Canal. | ||
| And so however you want to define it, and I hope my Democrat colleagues, this is an issue that affects America that should not be partisan. | ||
| And I hope they're not blinded by the fact that President Trump has come out so boldly on this. | ||
| But we shouldn't tolerate this. | ||
| The witnesses have stated they have operational control. | ||
| We can get into the semantics of the port authority versus the control, but operational control of the Panama Canal is real by the CCP. | ||
| The witnesses have also stated that a Chinese company got a sweetheart deal, a no-bid contract for control, operational control ultimately of these ports. | ||
| So I guess I want to ask, because I've talked too long, I don't have much time for questions, but Professor Kantorovich, I do want to ask you, as it relates to the treaty, and I'm glad Senator Cruz, or Chairman Cruz, has called this up, because there are real concerns about treaty violations here. | ||
| What are the most blatant? | ||
| What are the most obvious? | ||
| Is it the unfair being charged more? | ||
| Is it the fact that these are Chinese-owned companies that are controlled by the CCP? | ||
| What are the top two or three reasons that you would argue that they are, in fact, in violation of the treaty? | ||
| So again, I think the different, I think the charges and fees are less of an issue because they don't discriminate across countries. | ||
| We pay more because we use more, but it's not nationally discriminatory. | ||
| The presence of Chinese companies, especially Chinese state companies, but not limited to them, do raise serious issues and concerns for the neutrality of the treaty. | ||
| And I should point out in relation to some of the earlier questioning, the canal, for purposes of the neutrality treaty, is not limited just to the actual locks of the canal and the transit of ships to the canal. | ||
| According to Annex 1, paragraph 1 of the treaty, it includes also the entrances of the canal and the territorial sea of Panama adjacent to it. | ||
| So all of the air activities we're talking about are within the neutrality regime, the geographic scope of the neutrality regime in the treaty. | ||
| So the most, I'm out of time, but the most dead-on hit here is the treaty specifically prevents foreign operations, and that's exactly what we have. | ||
| Yeah, so to the extent these companies are in fact de facto controlled by China, this is something that could threaten the neutrality regime of the treaty. | ||
| Okay. | ||
|
unidentified
|
Senator, may I make a point of clarification? | |
| Sure. | ||
| You said that we all said that China had operational control. | ||
| I don't believe that China currently has operational control over the Panama Canal. | ||
| I'm not sure if any. | ||
| No, I didn't say all of you did. | ||
| I said one of the witnesses. | ||
|
unidentified
|
All right. | |
| But let me say this. | ||
| I did agree that there was a threat posed by this ownership. | ||
| I do think, though, that if your assumptions are correct, you are way understating the problem. | ||
| That's right, understating the problem, because they also then control the Suez Canal and the Mediterranean Sea. | ||
| And I actually have to admit, I'm a little confused as to why some of the senators asking these questions, Senator Blackburn, aren't more concerned about the biggest port in the United Kingdom being run by the Chinese. | ||
| Petraeus, in the port nearest Athens, one of the biggest ports in the Mediterranean, is not just run by a Chinese-linked company. | ||
| It's run directly by a Chinese-owned company. | ||
| And I was there. | ||
| So you're on to something, but if you're just focusing on Panama, that's only part of it. | ||
| No, I agree with you. | ||
| I think the difference here is that we gave it away, huge mistake. | ||
| Both Missouri senators voted for it back then. | ||
| Huge mistake. | ||
| But the one thing we got out of it, the one thing we got out of it, was a guarantee of neutrality. | ||
| And that's the issue here. | ||
|
unidentified
|
Thanks. | |
| Thank you. | ||
| Senator Curtis. | ||
| Thank you, Mr. Chairman. | ||
| Great hearing. | ||
| Appreciate this opportunity today. | ||
| I'd like to touch on something I haven't heard discussed today, and that is, unfortunately, China is not the only hostile country that exploits Panama to endanger our national security. | ||
| Iranian vessels under the Panamanian flag registry have been a problem for many years. | ||
| Chairman Sola, can you explain how Panama has enabled Iran to evade our sanctions? | ||
|
unidentified
|
Yes, thank you, Senator. | |
| About a year ago, when we were having this drought issue, there was also a lot of focus on Iran and how they were funding Hamas and the Houthis because they were attacking the Red Sea. | ||
| What we found was, what the United States has found, is that Iranian vessels are sometimes flagged by Panama in order to avoid sanctions so that they could sell the fuel that they have and then they can take that money and then they can use it as they wish. | ||
| Panama at the time had a very complicated process to deflag the vessels. | ||
| There was an investigation. | ||
| There was an appeals process. | ||
| By the time that we would, OFAC or the Treasury would go ahead and identify one of those vessels, by the time that they were doing the appeals and stuff like this, they've already changed flags to somewhere else. | ||
| So when we went to Panama, we met with the Panamanian president. | ||
| And I must say that we were very impressed because he was 30 minutes late, but he was breaking relations with Venezuela at the time because the election was the day before. | ||
| We explained to him the situation. | ||
| The very next day, we met with the maritime minister with U.S. Embassy personnel, and Panama actually adjusted their appeals process to make it more expedient. | ||
| So if the United States or OFAC would come and say that this Iranian vessel is avoiding sanctions, now we have a process in place to go ahead and do that. | ||
| And 53 vessels were deflagged because of that meeting. | ||
| If you would keep working on that, because that's a big deal. | ||
| And thank you for that answer. | ||
| Let me also go to, I mean, we have hammered on this a little bit, and I've heard several times some of you acknowledge that the interest from China is an economic threat to us. | ||
| But let me come back to this defense. | ||
| I think we've asked a number of times in different ways, but let me go back to the analogy of China puts a blockade on Taiwan and we're trying to move ships into that area quickly. | ||
| Can any of you say this is not just an economic threat to the United States, but a defensive threat as well? | ||
|
unidentified
|
At the FMC, it's not our area of expertise. | |
| We'll leave that to the military experts. | ||
| I will just say that to me, an economic threat is a military threat. | ||
| I mean, directly, but it is. | ||
| I think it's what you're directing to economic. | ||
| We at the Federal Maritime Commission don't have that area. | ||
| Chairman? | ||
|
unidentified
|
I would say that my biggest concern is that when a Chinese contractor gets a contract in Latin America, they usually put a clause in there that they bring their own workers in from China. | |
| And these workers are housed in camps outside. | ||
| And these camps will have guards on them, and they will have sometimes in Panama, for example, they have barbed wire around the camps. | ||
| So we really don't know who's in the camps. | ||
| And I think that, to me, causes me more concern on who's in the camp and what are they doing. | ||
| So these are actually sometimes thousands of workers that are brought in, for example, for the bridge or to do a port or something like this to undercut the local labor. | ||
| Along those lines, let me just talk about dollars from China spent. | ||
| We far outspend China in the region, yet if you look back on when Panama switched diplomatic recognition from Taiwan and we had comments from the President, Taiwan is an inalienable part of Chinese territory. | ||
| It coincided with economic investment from China in the region. | ||
| Is that something overall, in addition to the canal, we need to watch? | ||
|
unidentified
|
Yes, we definitely need to watch economics. | |
| So we need to, we haven't, the United States has left a void there. | ||
| We really have not been competitive in Panama, and hopefully that we can be. | ||
| Okay, and I've got just a few seconds. | ||
| So this bridge, we've brought this up a couple of times, the possibility of this bridge being damaged and closing canal. | ||
| But it reminds me of going through TSA at a suitcase going through the TSA. | ||
| Is there any reason that China can't watch or do whatever they want from this bridge to see get the intel from these containers? | ||
| And does that concern anybody? | ||
|
unidentified
|
Well, it definitely concerns Southern Command because they brought it up on numerous occasions that there could be some sort of surveillance or something like that on the bridges. | |
| Okay, I yield my time. | ||
| Thanks, Mr. Chairman. | ||
| Thank you. | ||
| Senator Moreno. | ||
| First of all, thank you, Chairman, for putting this hearing together. | ||
| I think it is very timely. | ||
| Mr. Sola, I heard you say that it kind of rang in my head. | ||
| You have navigated the canal 100 times. | ||
| I mean, you have pretty good experience. | ||
| I want to turn the testimony a little bit different direction. | ||
| You obviously haven't been there that much. | ||
| Tell me for the testimony, what are the people of Panama? | ||
| You obviously probably been to my home country where I was born in Colombia. | ||
| What is the sentiment among the people for how they feel about America? | ||
|
unidentified
|
Senator, I have many friends and family and professional relationships in Panama, and the bond between the United States and Panama is very deep. | |
| It's almost like the United States and Great Britain, for example. | ||
| The Panamanians love baseball. | ||
| They love basically a lot of the same things that we do. | ||
| The people are absolutely wonderful. | ||
| Now, they've suffered through catastrophically bad leaders, especially today, the President of Colombia, Petro. | ||
| We don't have to go down that path. | ||
| But here's what I'd ask you: obviously, we understand about shipping. | ||
| We understand the issues of trade, and that's been well documented. | ||
| I think that the treaty is clearly in violation. | ||
| There's no question about that. | ||
| In fact, Mr. Chairman, I'd like to see us speedily get to a point where we get a resolution allowing the President to renegotiate that or cancel that treaty. | ||
| But here's my question to you: the Darien Gap is a stone's throw away here to Annapolis, maybe not even a little bit further than that. | ||
| It used to be this insurmountable piece of geography that separated Colombia from Panama, but it's now used as a massive human and drug trafficking operation. | ||
| The presence of multinational gangs, multinational criminal organizations in that area, primarily, I will suggest funded by the Chinese. | ||
| You don't have to comment on that. | ||
| But what is the impact of these transnational gangs, this increase in human and drug trafficking, doing to maritime activity along the canal? | ||
|
unidentified
|
Senator, the Darien Gap is one of the most dangerous treks that I think anybody can do. | |
| And thank God for the new policy that we have on migrants and people coming into the country, because countless people have been harmed, died, or even very bad things happened to them through there. | ||
| On transnational gangs, I mean, anytime that there's money in a black market, they're going to go ahead and they're going to fill that void. | ||
| So hopefully, as I understand, the Darien Gap is not being utilized very much right now because people are coming to the United States and now cannot come in. | ||
| Right. | ||
| But the point is, what is the impact on maritime activity there? | ||
| In other words, security, Mr. Cramick, has got to be an issue for your members. | ||
| And having that increased presence of transnational gang activity, drug trafficking, you're talking about billions and billions of dollars. | ||
| Cocaine production in Colombia is at an all-time high. | ||
| What impact does that have on your members? | ||
|
unidentified
|
Senator, it's something we work hard on every day. | |
| The World Shipping Council is partnered with the World Customs Organization and 58 customs agencies throughout the world. | ||
| We ran actual operations to give data that we have on our supply chain and where there's anomalies to those customs officials and law enforcement authorities to action it. | ||
| A lot of it, the flow for commercial vessels, not into the United States but to the European Union, is coming from the transshipment point in Panama where our containers are being exploited and contaminated. | ||
| And so we are working hard as we sit here right now on that problem. | ||
| And of course the point I'm making is that China's influence there, whether we want to make it a technical question as to what control means, it doesn't matter. | ||
| When you have Chinese companies operating on both sides of the canal, having influence there through drug trafficking, they bring basic chemicals into Mexico, which makes its way here as fentanyl. | ||
| You have enormous Chinese influence in Central and South America. | ||
| And Mr. Sola, I go back to you with my final question. | ||
| Do you think fundamentally the problem here is that America has just failed to engage properly with Latin America? | ||
|
unidentified
|
Yes, I do. | |
| I believe that we have not had a presence there for long enough. | ||
| The State Department has designated countless past Panamanian presidents for corruption, but we haven't had the DOJ go ahead and have any convictions on those. | ||
| I think that if we did have a conviction one way or another, I think that that would change the narrative quite considerably. | ||
| And just one quick follow-up. | ||
| So if the U.S. took control back of the canal, if that territory was completely controlled, protected by the United States of America, what influence could we have in solving a variety of problems, the shipping ones that we have talked about, but also having U.S. presence with military backup there in Panama, preventing transnational organizations, preventing human trafficking, preventing drug trafficking? | ||
| Wouldn't that be celebrated among the free world as something that would be absolutely a net huge positive to that area? | ||
|
unidentified
|
Well, I can say this, that that is probably one of the top contraband areas in the world just because of its geographical location and the amount of containers that they move. | |
| So I think any time that we can lower the amount of contraband being distributed around the world, we'd be doing a good service. | ||
| So, Mr. Chairman, like I said earlier, we ratified that treaty here in the United States Senate. | ||
| I'd love to see us de-ratify it. | ||
| Thank you. | ||
| Senator Capito. | ||
| Thank you, Mr. Chairman. | ||
| Thank you all for being here today. | ||
| Really interesting hearing. | ||
| In the year 1913, the governor of West Virginia said that the Panama Canal would be critical to the State's coal industry. | ||
| What was then true is still true today. | ||
| 11 percent of the cargo that goes through that canal is coal. | ||
| Chairman Sol, thank you for your military service and for your great insight into this into Panama. | ||
| I know that the draft restrictions have been brought up already today, but the fact that bulk goods like West Virginia coal and other forms of energy cannot always be fully loaded to go through the canal is a major problem. | ||
| I know they are investing about $900 million to try to make the canal more resilient, but what ways can we assure that our state's energy exports are actually getting where they need to go when they need to get there? | ||
|
unidentified
|
That's a very good question, Senator. | |
| And the bulk and the coal are probably the most affected by the draft restrictions that we have. | ||
| The container ships and the passenger vessels have a much lighter draft. | ||
| We talked extensively with the Canal Authority and also with the Government of Panama on how they need to add water to the fresh water to the system. | ||
| They are losing about 1 or 2 percent a year. | ||
| So if they continue this way, the Panama Canal will be severely diminished by up to maybe 40 percent by 2050. | ||
| So fresh water is definitely the key to this. | ||
| I know that they are working with the Army Corps of Engineers. | ||
| We have seen some of those studies, and they have put a variety of options out there for the Canal Authority to go ahead and take advantage of. | ||
| Let me ask this probably quite simple question is why would they be in opposition to putting more fresh water in the canal? | ||
|
unidentified
|
I don't believe, well, the Canal Authority is available. | |
| It sounds easy, so maybe it sounds. | ||
|
unidentified
|
The Canal Authority isn't. | |
| The issue that they have is maybe 10 years ago, environmentalists kind of restricted what their watershed was of the canal, and that law has just recently been overturned. | ||
| So now the canal actually has access to the watershed. | ||
| So what they have to do is a major infrastructure project to go ahead and pull that water in. | ||
| And at the same time that they are saving up or raising the fees for the major infrastructure project, they are giving more and more money to the national coffers. | ||
| So it is up to about $2.4 billion right now, and they are saving for the infrastructure project. | ||
| Is that the $900 million infrastructure package I referenced? | ||
| Is that the same project? | ||
|
unidentified
|
I believe it is, the Rio Indeal? | |
| Yes. | ||
| So along with that, the issue going through the canal, not just the offloading or I mean, it's hard to offload coal out of a bulk container. | ||
| I mean, that's not an easy thing to do if you can even do it. | ||
| Is this whole thing about congestion pricing? | ||
| Nobody here from New York, are they? | ||
| But the congestion pricing at the canal where you can outbid and skip the line so then the line can be like 14 days later, even if you were at the front of the line. | ||
| This is probably what Senator Sheehy is wondering, like, how did I get in front of him kind of question? | ||
|
unidentified
|
So how is that working and is that fair? | |
| And who makes the judgment? | ||
| That to me, you talk about corruption. | ||
| That to me sounds like you could really be patting somebody's pockets here to be able to jump the line and have a significant effect. | ||
|
unidentified
|
Yeah, Senator, it is an auction system. | |
| It is being utilized more and more. | ||
| And it is what I was most concerned about and continue to be most concerned about, not necessarily right now because the unusual draft restrictions are not going on, but if there is another water shortage, the regular toll revenue has increased in terms of the canal. | ||
| But what has really increased is the special revenue that they get from various fees and from this auction thing. | ||
| That revenue has gone up about close to 300 percent for other transit services. | ||
| So that's a huge amount. | ||
| It also is analogous to me in some ways. | ||
| I know a lot of the ocean carrier companies got a lot of heat when they were making more money during the lack of the congestion during COVID. | ||
| Well, this is sort of similar. | ||
| They are providing fewer transits, and at the same time, they are making more money because of a market mechanism, though. | ||
| Talking about the Chinese Communist Party, well, this is the other way. | ||
| This is capitalist, but it is a different way of allocating space that they are utilizing more and more to make more and more money. | ||
| Now, I have no idea. | ||
| To the best of my knowledge, the money is going back to the Panamanian government. | ||
| I don't know of any reason to doubt that. | ||
| But that is a big cost. | ||
| And as I said before, it does disadvantage certain kinds of cargoes because they might feel that they are on a ship which doesn't prioritize its time passage as much as other kinds of cargoes. | ||
| I don't know how that affects coal. | ||
| All right. | ||
| All right. | ||
|
unidentified
|
Thank you very much. | |
| Thank you. | ||
| Senator Sheehi. | ||
| How long would it take China to block the canal for our usage if they decided to do it? | ||
| I know you are not military experts, but I think you've been in the canal 100 times. | ||
| You're all experts on the industry. | ||
| If they wanted to deny our usage of it, how long would it take them to do it? | ||
|
unidentified
|
Senator, I could say that prior to the year 2000, the canal had a quick reaction for us that kind of took all possibilities into consideration, either a ship being installed in the canal or to be able to move one out. | |
| I don't know what those capabilities or what the planning for that would be. | ||
| So effectively, we don't have a ready response. | ||
| But if China, I don't like the mindset that's kind of pervaded that there's this far-off hypothesis that you're not talking to military experts. | ||
|
unidentified
|
We're here because it's commercial reasons. | |
| Yeah, but this isn't a military question. | ||
| I mean, if he's driven the canal 100 times and you are a maritime expert, a couple of years ago, as you remember, I think it was the ever-given jackknifed in the Suez Canal. | ||
| That's not a military operation. | ||
| That's a ship that turns sideways. | ||
| So, if China chose to, how fast could they close the canal to our usage? | ||
|
unidentified
|
Well, they could probably do a similar thing, but it would more be an act of terrorism than it would be because they have facilities there. | |
| Most of this discussion has involved the economic threats that China is bringing up because of the Belt and Road Initiative and having these investments in other countries. | ||
| But, yeah, I mean, it's not hard to close off a waterway. | ||
| Panama Canal is actually quite vulnerable in terms of infrastructure. | ||
| It's not, you know, this is not a fort or militarily reinforced location. | ||
| Now, you're getting to the end of my knowledge of that. | ||
| But no, it would not take long, but I don't know what it has to do with it's not accelerated because they have people out of the port, unless I mean, unless you believe that they're, in theory, it's easier to infiltrate those ports with Chinese spies than it is other kinds of things. | ||
| But that's totally out of my purview. | ||
| That's more science. | ||
| I don't think it is out of your purview. | ||
| I think the reality is the canal is an economic engine. | ||
| It is also a national security engine. | ||
| And I appreciate, I'm not trying to be combative or set into traps. | ||
| I'm just trying to ask a common sense question, which is we can dance around. | ||
| I'm not an expert in this, I'm an expert in that, but the canal is vulnerable, as we've stated. | ||
|
unidentified
|
I guess, Senator, I'm just sort of saying, why would they bother with a military-like operation when they can get what they want with non-military means? | |
| Exactly. | ||
|
unidentified
|
If they can have influence in other ways. | |
| That's the point of the question. | ||
| Is we segregate ourselves artificially in a way that they do not. | ||
| We segregate ourselves. | ||
| Well, let's talk about military. | ||
| Let's talk about intelligence. | ||
| Let's talk about economics. | ||
| China doesn't work that way. | ||
| It's a whole government approach. | ||
| They don't draw a delineation between an economics discussion and a military one. | ||
| And their attack may not look like Pearl Harbor. | ||
| It may look like an everyday ship that decides it pulls into the locks and blows itself up, and now the locks are non-functional for our usage, and we can't support an interocean fleet transfer. | ||
| And our ability to defend it, as you referred to, Chairman, is now inhibited by the fact that we no longer have the military infrastructure around the canal that we did just as recently as 1999. | ||
| So, from a commercial perspective, do the shipping companies have concerns over the security of the narrow waterways? | ||
| We've got Straits of Malacca, we've got Suez Canal, we've got Gibraltar, we've got Panama. | ||
| Is that a concern that's thrown around in the boardrooms of the largest shipping corporations in the world? | ||
|
unidentified
|
Senator, I think it's something to think about every day. | |
| I mean, really, it's drawn into sharp relief with the Red Sea that it was what I call a pink flamingo. | ||
| Like, there are black swans that just come up, and there are pink flamingos that you can see, but you don't act. | ||
| But no one really thought a whole lot that one of the most important waterways in the world could be denied, and moreover, that it could be denied for such a sustained period. | ||
| The good news is that and denied, I might add, by a disaffected non-state actor of Bedouins running around with rocket launchers who also managed to beat us in a 20-year war in Afghanistan. | ||
| But my point to saying all this is we have debating operational control of the canal. | ||
| Yet it seems very clear to all of us that a very simple act can debilitate the canal and eliminate our ability to use it in a matter of minutes with no warning. | ||
| And we have no ability to intervene or stop that. | ||
| To me, that means we do not have operational control of the canal. | ||
| Thank you, Chairman. | ||
| Thank you. | ||
| I'm told Senator Young is on his way, so I'm going to ask a couple of questions and give him a few minutes to get here. | ||
| Chairman Sola, you have a deep understanding of Panama and the canal from personal experience. | ||
| In addition to your work on the Federal Maritime Commission, one example of China's influence with the Panamanian government was the effort to seize land near the Pacific end of the canal to build a new Chinese embassy, including your land. | ||
| Can you describe your personal experience, including how Panama ignored property rights as it sought to appease China with the new embassy? | ||
|
unidentified
|
Yes, Senator. | |
| About 10 years ago, the maritime business of my family expanded tremendously, and we were given a concession to build a marina on the Pacific area of Panama. | ||
| also incorporated a cruise component to that. | ||
| We brought the cruise companies to Panama. | ||
| This would have been the very first cruise in the Pacific. | ||
| We spent millions of dollars on consultants with Atkins Global, Moffat and Nichols, all the best consultants in the world, and everything was fine. | ||
| When Panama turned over to Belton Roads, they told us that that concession was going to be nationalized. | ||
| Then what they did is they rescinded our concession for the property. | ||
| We were going to build the cruise port for $30 million, U.S. private funds. | ||
| They gave the concession to a Chinese competitor and paid the Chinese competitor to date $300 million to build that cruise port. | ||
| It is going to take the Panamanian people 375 years to get it back. | ||
| I am from Miami. | ||
| That is the most expensive cruise port in the world, by far, by passenger. | ||
| In addition to that, they took where our land is going to be for the marina, they designated that to be the Embassy for the People's Republic of China. | ||
| So what happened next is absolutely appalling because when I went to the U.S. Embassy and I went to Commerce Department, they told me to fill out a complaint. | ||
| When I filled out the complaint, I went to my senator at the time, it was Bill Nelson, and I remember that I was denied being able to even file a complaint because the land that the Chinese embassy, the land that was going to be used by the Chinese embassy, my environmental permit for the marina, was going to expire in six months. | ||
| So the United States Commerce Department would not even allow me to file a complaint. | ||
| So I brought that issue here. | ||
| And thanks to the good work of at the time, I think it was Chairman Nelson and Chairman Wicker, that we were able to unwind that. | ||
| After about six years, Panama did the right thing and returned the land to my family. | ||
| Very instructive. | ||
| Senator Young. | ||
| Thank you, Chairman, for holding this important hearing. | ||
| Thank you, gentlemen, for being here. | ||
| The Panama Canal underpins our current economic strength and national security. | ||
| When 40 percent of U.S.-bound container traffic depends on a single waterway, we cannot afford unilateral toll hikes that choke out competition and leave our smaller carriers or our Midwestern exporters on the hook. | ||
| For instance, in my home state of Indiana, manufacturing firms and farmers rely on consistent, reasonably priced shipping routes to move heavy machinery, auto parts, and ag products like corn and soy. | ||
| If the Canal Authority's auction system prices them out, the ripple effects in American jobs and supply chains could be devastating. | ||
| Chairman Sola, given our enormous stake in the canal's operation, do you believe Congress or the FMC should more aggressively use Existing legal authorities or even create new legislative tools to block or penalize toll practices that disproportionately harm U.S. shippers and exporters. | ||
|
unidentified
|
Thank you, Senator, for the question. | |
| And I grew up in Goodland, Indiana, so that you know. | ||
| Fantastic. | ||
|
unidentified
|
I do believe that we should continue to monitor the situation. | |
| And if we do need more regulations or statutes, that we would come back to Congress because we get our marching instructions from you. | ||
| Moving the agricultural products that we get out of the Midwest all over the world and through the country, not only do we focus on the Panama Canal, but we also focus on about $5 trillion worth of goods coming in and leaving the United States here at the Federal Maritime Commission. | ||
| So it's definitely one of our main concerns. | ||
| Well, thank you. | ||
| I'm not surprised. | ||
| I always tell people Indiana is a maritime state if you think about our dependence on the waterways and our shipping lines and all the rest. | ||
| So you're certainly proving that. | ||
| So we will stay in touch. | ||
| And if you in the future would like to outline any mechanisms or measures that you think would be effective to help ensure fair treatment for our interests, please let me and others on this committee know. | ||
| When the two Panama Canal treaties were signed, we lived in a different world, one where Chinese state-backed actors didn't wield strong influence over global infrastructure, and issues like drought were rarely factored into international agreements. | ||
| As we all know, times have certainly changed, but the United States is still the Canal's biggest customer, and quite frankly, we have every right to expect an operational framework that acknowledges our modern security and economic challenges. | ||
| States like Indiana, with robust exports, feel these impacts, even if we're far from the canal itself. | ||
| Chairman Sola, and then I'll allow others to respond. | ||
| In light of evolving conditions, especially increased foreign investment from China, do you believe the U.S. should explore a more comprehensive update or supplemental protocols to these decades-old treaties? | ||
|
unidentified
|
I definitely believe that we should support U.S. investment. | |
| And not having an ambassador there for so long has been detrimental to us, especially as the case that I just mentioned earlier, where we didn't have an ambassador and we had a U.S. company in need of service. | ||
| So, however, we can promote U.S. investment, especially in infrastructure, this is where China is definitely beating us with the Belt and Roads, where they understand that. | ||
| And I believe that our X-M Bank and our DFC is so limited in what they can do by the restrictions that they have that we are not able to invest into infrastructure like we should. | ||
| I hope the administration will prioritize this ambassador spot as nominations are made. | ||
| I hope we will prioritize it in the Senate. | ||
| My colleagues on the Democratic side of the aisle will be warm to that nomination and moving it quickly. | ||
| Something both parties, frankly, have fallen short on in recent years is prioritizing these. | ||
| But other comments? | ||
| Mr. McFay? | ||
|
unidentified
|
Yeah, well, Senator, I won't surprise you since you and I served together in the House that I actually am pretty by parson. | |
| I agree with the Chairman on what he said. | ||
| I will say that certainly we need to look at other kinds of ways to get U.S. companies in positions where they can truly compete with the Chinese on some of these things. | ||
| Blaming it all on Panama really misses the point. | ||
| I've seen the same thing in Greece, where Greece didn't want to give the concession of its largest port to a Chinese company, but because of its financial difficulties, it was getting pressure from international organizations such as the IMF, Europe, and even maybe some of the United States to do so. | ||
| So I just ask you to look at that. | ||
| And I do want to say one quick thing. | ||
| You're right about the cost. | ||
| And as I said before, you were able to get here. | ||
| The Panamanians are making far more on their canal than they ever had before. | ||
| That's not necessarily a bad thing, as long as it's going to the right place. | ||
| But where they're really making the money is on these auctions. | ||
| And that is why it remains a concern of mine, I'm sure, the chairman's. | ||
| And that is where we are looking at potentially using our authority under Section 19 of the Merchant Marine Act, where we could, if, we can show that it is a basically a problem with the foreign trade of the U.S. | ||
| It's interfering with foreign trade of the U.S. There are certain things that we can do. | ||
| But I do think we need more information before we could make that kind of action. | ||
| But we're certainly working on that, and we do have that authority at the FMC. | ||
| Thank you, and good to see you again, sir. | ||
| Mr. Kremek, did you have anything? | ||
|
unidentified
|
We had discussed Senator Young some of the infrastructure projects to make the canal more sustainable and viable and how the United States on the U.S. Army Corps of Engineers has already done some feasibility reviews of those projects. | |
| So that would certainly be something to take a look at to make the canal viable with additional supplies of fresh water. | ||
| Thank you. | ||
| Chairman? | ||
| Senator, if I may. | ||
| Sure. | ||
|
unidentified
|
Senator. | |
| Sorry. | ||
| I'm on Zoom. | ||
| You spoke about renegotiating the treaties. | ||
| And I think one of the things about treaties as an instrument of governance is they're not very flexible and they don't really have automatic processes typically for easy amendment. | ||
| And I spent before this hearing, I spent a fair amount of time reviewing the ratification hearings in the Senate in 1978. | ||
| And back then, the principal concerns the Senate was concerned with then is the Soviets and Cuba, actually, not China and Iran. | ||
| So the world has changed a huge amount. | ||
| China's role has changed a huge amount. | ||
|
unidentified
|
And of course, back then, 1999 seemed very far off. | |
| 2025 seemed a world away. | ||
| And as a result, I think it is useful to revisit treaties and seek to renegotiate them, to update them to sort of current events. | ||
| And of course, the United States has a considerable amount of leverage it can use to seek such additional protocols to modernize these treaties to current events and current geopolitical realities. | ||
| Makes great sense. | ||
| And I'm glad you spoke up. | ||
| Thank you, Mr. Kantorovich. | ||
| Mr. Chairman. | ||
| Thank you. | ||
| I want to ask a couple of follow-ups and then we're going to wrap up the hearing. | ||
| Commissioner Mafei, you mentioned a minute ago if a determination was made that this was having negative impacts on U.S. trade. | ||
| You said there are a number of remedies that are possible and you didn't specify what those were, so I just wanted to ask what you were referring to. | ||
|
unidentified
|
Yeah, I mean, there are certain things we can do as countermeasures, such as sanction Panamanian ships. | |
| That could be Panamanian flagships. | ||
| Panamanian flag is one of their major sources of revenue. | ||
| It is the number one, what we call flag of convenience in the world. | ||
| There are several others, and I think I'd like to get back to you in writing. | ||
| I mean, I'm not trying to avoid the question. | ||
| No, no, I wouldn't. | ||
|
unidentified
|
I can put the, you know, we can, well, if you don't mind, we'll get together and do a joint answer. | |
| We'll put where our authority comes from, what we think we can do, and maybe even what we're concerned about or what the limits to that would be. | ||
| Well, and I'll say that this hearing has been a nice bipartisan demonstration of a lot of expertise. | ||
| There's a reason you guys have the role you have because you know what you're talking about. | ||
|
unidentified
|
I'm hoping that my chairmanship, which ended last week after a full term, will result in a full, very successful term for my good friend and colleague as chairman. | |
| Maybe the friendliest transition in Washington this week. | ||
| Professor Kontorovich, I want to get back also to the exchange you had with Senator Young, and it harkens back to the opening exchange you and I had. | ||
| We've heard testimony that Panama may well be in violation of this treaty in at least two regards. | ||
| One, with respect to its obligation to keeping the Panama Canal neutral and the major concessions to China, the control that China has over ports on both ends, and the bridge across the canal, which has the potential to shut down transit. | ||
| We also heard testimony about the degree of revenue that Panama is taking, and that's potentially in violation of the obligation that tolls and other charges shall be just, reasonable, equitable, and consistent with principles of international law. | ||
| I want to ask you, Professor, assume that the United States makes the determination that Panama is in violation of this treaty. | ||
| I asked about what the remedies were, and you mentioned at the time military force. | ||
| Military force is always one potential remedy. | ||
| What other potential remedies are there? | ||
| And in particular, could a consequence of being in breach of the treaty be a determination that the treaty is null and void, that the concession of control of the Panama Canal to Panama is no longer in force? | ||
| And could that, under international law, result in the United States returning to operating the Panama Canal? | ||
|
unidentified
|
What's your judgment? | |
| Yeah, I think treaties like this demonstrate that countries really need to think long and hard before they give away strategic assets. | ||
| Because the United States is free to cancel this treaty or at any time withdraw from the treaty, as it were. | ||
| But given that the United States has transferred control and sovereignty of the canal zone to Panama, the cancellation of the treaty would not necessarily reverse that concession. | ||
| Concessions that have to do with sovereign control are not particularly reversible. | ||
| For example, Israel made a deal with Lebanon to give maritime territory to Lebanon in exchange for peace just two years ago, did not get peace. | ||
|
unidentified
|
It's not clear that it can simply cancel and get that territory back. | |
| Now, it is the case that America can take all sorts of measures to insist on neutrality. | ||
| And if neutrality means putting American firms in operation or otherwise taking other steps, that is something that can be done. | ||
| But a kind of territorial control is not a clear remedy, unless it is something that just accompanies the steps needed to restore the regime of neutrality. | ||
| All right. | ||
| Well, I want to thank all the witnesses for their important testimony here today. | ||
| Senators will have until the close of business on Tuesday, February 4th, to submit questions for the record. | ||
| The witnesses will have until the end of the day on Tuesday, February 18th, to respond to those questions. | ||
| And this concludes today's hearing. | ||
| The committee stands adjourned. | ||
|
unidentified
|
Thank you. | |
| Very nice that you are. | ||
| Yeah, okay. | ||
| All right. | ||
| All right. | ||
| Very nice. | ||
| How to see you on YouTube. | ||
| I don't know what to do. | ||
| President Trump has said he wants the U.S. to regain ownership of the Panama Canal. | ||
| Earlier today, a Senate hearing investigated the strategic importance of the canal and its impact on U.S. trade and national security. | ||
| Watch the Commerce, Science, and Transportation Committee hearing in its entirety tonight at 9 Eastern on C-SPAN. | ||
| C-SPAN Now, our free mobile video app or online at c-SPAN.org. | ||
| Well, today, White House Press Secretary Caroline Levitt holds her first press briefing of the new Trump administration. | ||
| We'll have that live at 1 p.m. Eastern on C-SPAN. | ||
| You can also watch on the free C-SPAN Now video app or online at c-SPAN.org. | ||
| If you ever miss any of C-SPAN's coverage, you can find it anytime online at c-SPAN.org. | ||
| Videos of key hearings, debates, and other events feature markers that guide you to interesting and newsworthy highlights. | ||
| These points of interest markers appear on the right-hand side of your screen when you hit play on select videos. | ||
| This timeline tool makes it easy to quickly get an idea of what was debated and decided in Washington. | ||
| Scroll through and spend a few minutes on C-SPAN's points of interest. | ||
| C-SPAN, Democracy Unfiltered. | ||
| We're funded by these television companies and more, including WOW. | ||
| The world has changed. | ||
| Today, a fast, reliable internet connection is something no one can live without. | ||
| So WOW is there for our customers with speed, reliability, value, and choice. | ||
| Now more than ever, it all starts with great internet. | ||
| Wow. | ||
| WOW supports C-SPAN as a public service, along with these other television providers, giving you a front-row seat to democracy. | ||
| Our first guest of the morning, Lisa Gilbert. | ||
| She is the co-president of the group known as Public Citizen, here to talk about the agenda of the Trump administration. | ||
| Good morning. |