Panama Canal

11-02-2025

11:30 AM

Recently, U.S. President-elect Donald Trump called the transfer of the Panama Canal to Panama a "foolish" decision and demanded its return to U.S. control. This article delves into Trump’s controversial statements, the canal’s historical significance, and its strategic importance for the UPSC Exam.

USA’s Position on the Panama Canal

In December, US President Donald Trump criticised the Panama Canal for charging “unfair high fees” on US ships using the canal route and hence ripping off the US. There were concerns raised about the growing influence of China in the region marking potential security risks. These charges are however not new as they were also raised by Donald Trump during his first term of governance.

Why is the USA Upset?

High Transit Fees: The Panama Canal Authority (ACP) raised fees following a severe 2023 drought that reduced shipping capacity by 36%. U.S. vessels, heavily reliant on the canal, were significantly impacted.
Chinese Influence: Since joining China’s Belt and Road Initiative in 2017, Panama has seen increased Chinese investment in the canal, intensifying U.S. concerns over Beijing’s regional presence.

The Panama Canal remains extremely important to global trade, U.S. military mobility, and international power dynamics, making it an important topic from exam perspective.

About Panama Canal

The Panama Canal, a man-made waterway in Panama, connects the Pacific and Atlantic Oceans, revolutionizing maritime trade by eliminating the need to navigate around South America's southern tip. 82 km in length, this strategic route serves as a vital shortcut for ships traveling between the eastern and western coasts of the Americas, making it indispensable for global trade and geopolitics.

Facts about the Panama Canal
Feature	Details
Location	Panama (Central America)
Connects	Atlantic Ocean (via the Caribbean Sea) and Pacific Ocean
Length	Approximately 82 km (51 miles)
Depth	12.5 meters (41 feet)
Width	Approximately 300 meters (984 feet)
Built By	Initially by the French; completed by the United States
Year Built	Completed in 1914
Purpose	To reduce maritime travel time and connect trade routes across the Americas
Time to Cross	Takes about 8-10 hours for ships to pass through the canal
Importance	Critical for global trade, connecting two major oceans and continents

History of the Panama Canal

The Panama Canal construction started in the 19th Century but was halted due to construction difficulties. However, in 1904, the project was restarted by the United States and the canal was completed in 1914. The project was built through various obstacles including dense jungles, harsh weather conditions and rough terrains marking a significant achievement. The construction of the canal underwent a lot of geopolitical negotiations as the canal came under Colombian jurisdiction before Panama declared its independence with the support of the US in 1903. The Hay-Bunau Varilla Treaty was signed giving the US the control of Panama Canal, which was handed back to Panama under the Torrijos-Carter Treaty in 1999.

Panama Canal Objective

Before the construction of the Panama Canal, the ships had to traverse the Cape Horn route around South America which was usually time-consuming and hazardous. The Panama Canal was built with the objective of:

Reducing travel time by cutting down the shipping distance between the east and west coasts of the USA.
The Canal Route provided a faster and cost-effective route for international trade.
The Panama Canal connects the major oceans and offers military and economic advantages.

Panama Canal and the Impact of Climate Change

The Panama Canal, an important global maritime trade route, has faced a significant number of challenges due to change and its impact on environmental shifts. The major impacts were:

Impact	Details
Prolonged Drought	Since early 2023, the canal has faced an extended drought, with October 2023 experiencing 43% less rainfall—the driest October since the 1950s.
Reduced Ship Traffic	Daily ship transits dropped to as low as 22 in December 2023, down from the usual 36-38, due to low water levels in Lake Gatun, vital for canal operations.
Size Restrictions	Lower water levels forced restrictions on larger vessels, which require more water for buoyancy, increasing the risk of grounding in shallow waters.
Global Trade Disruptions	As the canal handles 5% of global shipping, operational limitations have caused delays and rerouting, impacting international trade.
Shift to Alternative Routes	Water shortages have driven vessels from Asia to the U.S. to use the Suez Canal, adding about six extra days to their journey.

Panama Canal FAQs

Q1. What was the Panama Canal treaty?
Ans. The Panama Canal Treaty (1977) transferred control of the Panama Canal from the U.S. to Panama by the end of 1999.

Q2. Why did Jimmy Carter sign the Panama Canal treaty?
Ans. Jimmy Carter signed the treaty to improve U.S.-Panama relations and ensure the canal's neutrality while respecting Panama's sovereignty.

Q3. What was the main purpose of the Panama Canal?
Ans. The Panama Canal was built to provide a quicker maritime route between the Atlantic and Pacific Oceans, facilitating global trade.

Q4. What is the Panama Canal Act?
Ans. The Panama Canal Act of 1979 established the framework for U.S. operations and the eventual transfer of the canal to Panama.

Q5. Which country is the Panama Canal in?
Ans. The Panama Canal is located in Panama.

Q6. Which disease was one of the Panama Canal's biggest challenges?
Ans. Malaria was one of the biggest challenges during the construction of the Panama Canal.