At What Cost Did China Get Canal?

0 Comments | Insight on the News, Sept 13, 1999 | by J. Michael Waller

The Clinton administration sees no Communist Chinese threat to the Panama Canal. Senate Majority Leader Lott and other congressional Republican leaders wonder why.

Control of ports on both sides of the Panama Canal by a Chinese shipping company tied to the People's Liberation Army, or PLA, poses no security threat to the United States, the Clinton administration has insisted in coordinated statements by the State Department, the Pentagon and the White House.

But congressional Republicans aren't buying that story. Senate Majority Leader Trent Lott sent Insight's report, "China's Beachhead at Panama Canal," to Defense Secretary William Cohen, calling the article "very disturbing" and asking for his response. Some on Capitol Hill are starting to ask whether the Clinton administration, as part of a suspected policy of relaxing vigilance toward China as a result of campaign contributions, has allowed Beijing to dominate the Panama Canal.

"I don't think we're in this situation by happenstance," Rep. Bob Barr, a Georgia Republican, tells Insight. "Two things are at play here. One, the Clinton administration, from a strategic standpoint, doesn't care about the Panama Canal. They don't have an appreciation of its importance or its history. They flat out don't care. There is a connection with other policy goals, namely appeasing the Communist Chinese and getting money for them and, at best, not standing in the way of the Chinese gaining a strategic foothold in Panama -- and very possibly assisting them in that effort."

The administration won't acknowledge the relationship between the controversial company, shipping giant Hutchison Whampoa Ltd., and the PLA, even though the Senate Governmental Affairs Committee investigating Beijing's alleged covert funding of the 1996 Clinton-Gore reelection effort publicly established the connection two years ago.

GOP concerns involve coincidences in the actions of key Clinton administration figures, including some appointments in, of all places, Panama, at the same time the Panamanian leadership was cutting deals with Hutchison Whampoa Ltd. The suspicions tie in to similar associations of other administration officials in Washington during the Chinese campaign-funding scandal.

One of the concerns is possible politicization of the Panama Canal Commission, the U.S. Panamanian agency running the waterway. President Clinton appointed Undersecretary of the Army Joe Reeder, who had no expertise on Panama or maritime issues, to head the normally nonpolitical commission consisting of five Americans and four Panamanians. Reeder was an old friend and law-firm colleague of the late Democratic National Committee chief and Commerce Department secretary Ron Brown, a central figure in the China campaign controversy. In March 1996, with Hutchison Whampoa poised to establish its beachhead, Reeder accompanied Brown on a trade mission to Panama.

In 1998, Clinton appointed former Florida Democratic Party chief Simon X. Ferro as ambassador to Panama. Ferro, who assumed his post in February, is suspected to have received the position as a reward for securing the ill-fated nomination of first lady Hillary Rodham Clinton's brother, Hugh Rodham, as Florida's Democratic candidate for the U.S. Senate in 1994.

Clinton appointed longtime crony and former White House chief of staff Thomas "Mack" McClarty as special envoy to the Western Hemisphere, even though he had no experience in Latin America. A source with business in Panama tells Insight that McClarty has "spent a lot of time in Panama smoothing the waters for a lot of these activities going on" with Chinese companies and has built strong relations with Panama's secretive banking community.

Another White House fixture in Panama is Clinton political strategist James Carville, who in 1997 advised outgoing Panamanian President Ernesto Perez Balladares, who wanted to serve beyond his constitutional single five-year term. Balladares engineered the turnover of former U.S. facilities to Hutchison Whampoa.

In his Aug. 1 letter to Cohen, Lott was blunt: "Bill, this administration is allowing a scenario to develop where U.S. national-security interests could not be protected without confronting the Chinese Communists in the Americas." He termed Hutchison Whampoa "an arm of the People's Liberation Army."

Before Cohen could reply, administration spinmeisters immediately responded with carefully worded statements coordinated between the White House, the State Department and the Pentagon. Hutchison Whampoa issued a statement denying any connection with the PLA.

"We do not anticipate any problems whatsoever from the result of this -- of the port facilities that are owned by a Chinese company," said Pentagon spokesman Kenneth Bacon in response to a Washington Times report on LoWs letter. "We do not see the Chinese-owned port facilities as a military or a national-security threat."

"The United States is satisfied our interests will be protected after the canal is turned over in December," White House National Security Council spokesman David Leavy told reporters on Aug. 12. "We have seen no capability on the part of the PRC to disrupt the canal's operations." State Department spokesman James Rubin echoed the same line: "We have seen no capability or interest on the part of the People's Republic of China, a major user of the Panama Canal, to disrupt its operations."