Panama will host world leaders next week--including former president Jimmy Carter and Secretary of State Madeleine K. Albright--to mark the year-end handover of the Panama Canal from the United States, but some Republican lawmakers say it's no time to celebrate.
Pointing to a contract letting a Hong Kong company operate port facilities on both ends of the canal, a handful of Republicans in Congress and former defense officials argue that giving the canal to Panama will allow China a foothold in the Western Hemisphere and threaten America's security.
"If we do nothing, I can guarantee you that within a decade, a communist Chinese regime that hates democracy and sees America as its primary enemy will dominate the tiny country of Panama, and thus dominate the Panama Canal, one of the world's most important strategic points," Rep. Dana Rohrabacher (R-Calif.) said yesterday as a subcommittee of the House Committee on Banking and Financial Services began hearings on the issue.
At a recent news conference organized by the John Birch Society, retired Adm. Thomas Moorer warned that China could sneak missiles into Panama, using it as a launch pad for attacking the United States. And former defense secretary Caspar W. Weinberger wrote in a Forbes magazine editorial in October that the port contract was "the biggest threat to the canal."
The warnings echo the bitter debate that took place 20 years ago when the Panama Canal Treaty was signed. They also mark another effort by influential Republicans to attack President Clinton for failing, as they see it, to recognize the threat emanating from China. Many of the critics of the canal contract previously assailed Clinton over Chinese espionage allegations, illegal campaign contributions and, most recently, membership in the World Trade Organization.
The focus this time is Li Ka-shing, the Hong Kong billionaire who heads the vast Hutchison Whampoa Ltd., a publicly traded company involved in everything from telecommunications to real estate to shipping. Li, whose family fled to Hong Kong from the war-torn mainland in 1940, is a quintessential capitalist success story. He dropped out of school at 17, started a small plastics company and now rules a conglomerate with 80,000 employees, a market capitalization of $36 billion and operations in 24 countries.
The group's port services subsidiary runs 17 other facilities around the world, including Britain's three largest ports. It pioneered a "hub and spoke" system in Hong Kong, the world's busiest container port.
Of Hutchison's 500 employees in Panama, none is Chinese. The top manager is British, the number two is an American and the handful of other managers are British or Australian. About 97 percent of the employees are Panamanian.
Allegations that the company is a stalking horse for China are "driving me completely nuts," John E. Meredith, group managing director of Hutchison International Port Holdings Ltd., said in a telephone interview from his headquarters in Britain. "We are a commercial enterprise that is accountable to our stockholders. . . . We cooperate with governments around the world, but do not serve as a front or tool for any of them."
Under Panamanian law, Li's company has no power over ship traffic in the canal, which is regulated by the Panama Canal Commission. Moreover, ships that pass through the canal do not have to use Hutchison facilities, and by treaty American warships retain the right to jump in front of other ships if they need to use the canal.
Li's company won the bidding to run docks on both ends of the canal in 1997. It plans to turn the Pacific facility, Balboa, into a hub for transfering cargo from large ships to vessels small enough to fit into ports on the west coast of the United States and South America.
Panama--not Li--insisted that the deal also include Cristobal, a smaller, little-used Caribbean port in Colon, where Hutchison may build facilities for cruise ships. At present, 90 percent of port services on the Caribbean side are provided by two other ports--one run by Stevedoring Services of America, a U.S. firm, and the other by Evergreen, a Taiwanese company.
This is the second time that congressional Republicans have examined the Hutchison contracts. In 1997, Congress looked into the matter after Hutchison outbid two American companies, including Weinberger's former firm, Bechtel Corp. But a staff member of Senate Foreign Relations Committee Chairman Jesse Helms (R-N.C.) went to Panama and wrote a report that said: "U.S. and Panamanian sources--both in the government and in private industry--state that Hutchison's development of two Panamanian ports does not translate into a direct national security threat to the Panama Canal."
This year, the issue has been brought back to life--spurred in part by the coming handover of the canal--even though Hutchison took control of the port facilities two years ago without incident. In June, aides to Rohrabacher and Helms traveled to Panama and wrote a new report full of strong allegations. It called the bidding process for the ports "unfair and corrupt." It juxtaposed a brief account of the bidding with a statement that "Chinese organized crime organizations are active in drugs, guns and illegal alien smuggling in Panama."
Nothing in the report linked Li to those alleged activities. But it quoted unnamed "security officials" as warning that "Panama has become the central base of operations for communist China in Latin America."
When a congressional hearing took place in October, however, no witnesses came forward to substantiate those claims. Marine Corps Gen. Charles E. Wilhelm, commander of the U.S. Southern Command, said "the biggest threat to the canal is environmental degradation" that could interrupt the flow of fresh water.
"As the senior U.S. citizen on the ground at the canal, I would see it as my responsibility to raise the red flag, if I might use that term, if indeed there were a threat in the making," testified Alberto Aleman Zubieto, administrator of the Panama Canal Commission and a retired U.S. Army colonel. "I have not done so because frankly, by any realistic analysis, Hutchison's concession to operate two ports simply does not constitute that threat."
Larry Wortzel, a former U.S. military attache in Beijing who now directs Asia studies at the Heritage Foundation, said in an interview that if China wanted to engage in sabotage or intelligence-gathering at the canal, it would not need port facilities to do so. And he said critics of China ought to "be careful not to be racist" in calling Li a front for Beijing.
Yet even Clinton appears to be unclear about China's influence over the canal. "I think the Chinese will in fact be bending over backward to make sure that they run it in a competent and able and fair manner," the president said last week. "I would be very surprised if any adverse consequences flowed from the Chinese running the canal."
In reality, the existing Panama Canal Commission will become the Panama Canal Authority, to be run by Panamanians with technical assistance from Americans who have long served in the area. China will have no role.
Republican critics of the Hutchison port contract say Li is a front for the People's Republic of China, citing his friendships with Chinese leaders and his membership on the honorary board of the China International Trust & Investment Corp. (CITIC), an investment arm of China's State Council.
But Hutchison representatives note that the CITIC board also includes former secretary of state George Shultz and U.S. insurance executive Maurice Greenberg. They point out that other senior business executives, including Greenberg, have similar relationships with Chinese leaders. And they say Li also is friendly with politicians in the West, including Prime Minister Tony Blair of Britain.
Li's critics have alleged that his company has close ties to the Chinese military. But Hutchison says its only connection is a joint venture that leases telecommunications equipment to a commercial operation owned by the People's Liberation Army. Overall, Hutchison says, only about 10 percent of its business is from the Chinese mainland (not including Hong Kong), and that total includes joint ventures in China with companies such as Motorola Inc. and Procter & Gamble Co.
China, in any case, has a strong interest in keeping traffic flowing freely through the canal. It vies with Taiwan as the canal's third-biggest user, after the United States and Japan.
CAPTION: Hutchison Whampoa Chairman Li Ka-shing called the controversy over Chinese influence a "joke."
CAPTION: Locomotives guide the cargo ship Hercules Leader through the canal near Panama City. Under Panamanian law, Hutchison Whampoa has no power over ship traffic in the canal, which is regulated by the Panama Canal Commission.