Charting the Canal's Future With Panama at the Helm

Late last month, transiting the Panama Canal for the first time in many years, I marveled again at this engineering wonder, the initiative and sacrifice that marked its construction, and the beauty and impenetrability of the passing jungle.

Today the canal is in transition. The dates of its turnover from the United States to Panama, which seemed so far away in the emotional treaty debate of the late 1970s, are here. The old US-dominated Panama Canal Company was replaced by a binational Panama Canal Commission in 1990. The Panamanian flag flies over the Canal Zone. Its first Panamanian administrator, Alberto Alemn Zubieta, was appointed last August. The principal US military command, the Southern Command, is slated to move to Florida next year. And the canal will be fully turned over to Panamanian control on Dec. 31, 1999.

Some in the US still regret Washington that found it necessary to negotiate relinquishment of the canal. Yet, given the pressures within Panama and Latin America generally, succeeding US administrations, both Republican and Democratic, felt action was inevitable. President Lyndon Johnson opened "discussions" (he tried unsuccessfully to avoid the term "negotiations") in 1964 after riots in Panama and the Canal Zone during which four Americans and more than 20 Panamanians were killed.

In 1977, after more than a decade of negotiations, ways were found to balance Panamanian pressure for sovereignty over the canal area and US desire to assure neutrality in canal operation. Two treaties were signed: one detailing provisions of the transfer of control, the other acknowledging the perpetual interest of the US in the operation of the canal.

Although to most observers the agreements satisfied both sides, concerns over future operation remain. These include possible decline in work-force quality, potential labor unrest, toll increases making the canal uneconomic for shippers, or diversion of revenues from maintenance.

Washington, apprehensive over possible politicization of management and work force, has strongly recommended that Panama continue hiring workers on a merit system. Panamanians respond that this is now a matter for them to decide, insisting that considering political connections is not necessarily inconsistent with employing qualified workers. Questions remain on whether employees should be able to unionize and have the right to strike.

Feeling inadequately compensated during the years of US control of the canal, Panama sought additional payments during the negotiations. US negotiators, stressing that Congress would be unsympathetic to paying Panama to take back the canal, emphasized that any additional income must come from canal tolls. Some increase in tolls became inevitable. By agreement of the commission, charges went up 8.2 percent on Jan. 1; another raise of 7.5 percent will be applied on Jan. 1, 1998. Shippers are apprehensive that Panama, when it has full control, will raise tolls even further and, given its needs for revenue, may divert some funds for other purposes. The US never operated the canal for profit; all income went to maintenance of the waterway.

FROM time to time the issues of expanding the present canal, building another, or constructing an alternative railroad arise. Already several hundred ships in the world are too large to transit today's lock system. A 1960s plan to use nuclear explosions to build a new canal was abandoned. The enormous cost of any other construction method remains an inhibition. Shippers, however, will continue to look at possibilities.

Today, with more than 13,000 transits annually, the canal remains vital to world trade. As the operation and maintenance of the waterway shift rapidly to Panama, that government has a heavy responsibility to insulate the canal from internal politics, corruption, or ecological deterioration, each one of which could cause the decline of this impressive "path between the seas."

* David D. Newsom, former undersecretary of state, is Cumming Memorial Professor of International Affairs at the University of Virginia.