Watch: Implications of the Panama Port Deal for U.S. National Security

Nick Vyas, founding director of the Randall R. Kendrick Global Supply Chain Institute at the University of Southern California’s Marshall School of Business, discusses the ramifications of the sale of two port-management contracts at the Panama Canal by a Chinese company to an American investment firm. 

The BlackRock firm has agreed to purchase a majority interest in two ports at each end of the Panama Canal from a Hong Kong-based management company, after President Trump raised concerns about Chinese control over Canal operations. Vyas says that’s an outgrowth of President Trump’s “extreme focus” on infrastructure in his second term. The concern, he says, is that the Chinese government could potentially use its double foothold at the canal as a geopolitical “weapon,” given the crucial importance of that location to international shipping. “You could literally stop trade flow if there were to be concerns,” he says.

This isn’t the first time that controversy has arisen over foreign control of key ports, In 2006, Congress voted to block Dubai Ports World from purchasing the management contract at six U.S. ports. Such facilities have always been seen as “a national security paradigm,” Vyas says, but the issue wasn’t a top priority in the last few decades. Now, Trump has brought it to the fore, “and the Panama Canal was a target under this lens.”

There’s no evidence that China had ever used its interest at the canal to affect shipping activities, such as granting priority of passage to Chinese ships. But Vyas says there’s a larger concern about control over global infrastructure, especially arising from China’s massive Belt and Road development initiative in multiple countries.

Notwithstanding reports that Chinese’s current economic challenges are causing it to cut back on some of that investment, “that…