A historic transfer of power; Sovereignty: Questions arise as the United States prepares to relinquish control of the Canal Zone to Panama.

THE BALTIMORE SUN

AT HIGH noon on Dec. 31, the last day of the 1900s, the Republic of Panama will at last achieve what it has always proclaimed as its destiny: full sovereignty over of the inter-ocean canal that the gringos built in the heyday of U.S. imperialism.

At that moment, the United States will cede control over the Panama Canal Zone to a government that has yet to prove its competence to maintain and operate one of the planet's great maritime choke points.

The construction of the Panama Canal from 1903 to 1914 was an engineering marvel that heralded America's emergence as a world power. It made a two-ocean Navy a reality, and was the logical extension of an expansionist policy that brought Hawaii, Puerto Rico, part of Cuba and the Philippines under the Stars and Stripes.

When President Jimmy Carter dared to sign a treaty in 1977 bequeathing the canal to Panama at the end of this century, California's Gov. Ronald Reagan thundered: "We built it, we paid for it, it's ours, and we're going to keep it." The issue tore the Senate apart before ratification passed by a one-vote margin. In the political fallout that came after, only seven of the 20 pro-treaty senators up for re-election in 1978 returned to Capitol Hill. Two years later, 11 more senators met a similar fate and Reagan defeated Carter for the presidency.

It is ironic that an issue that mesmerized the American people a generation ago hardly flickers across the radar screen of public awareness today. When the Panamanians elected a new president who will oversee the canal transition, the news was relegated to the inside pages. Diplomats in both countries hope the situation will remain low key. But it is touch-and-go, especially with Senate Foreign Relations Committee Chairman Jesse Helms on the warpath.

Real nationhood

Midway in the 20-year period between passage of the Carter treaty and the fast-approaching Panamanian takeover of the canal, U.S. forces intervened in Panama to overthrow and arrest the dictator-thug, Gen. Manuel Antonio Noriega. Many Latin Americans were convinced this was proof positive that the Yanquis would never give up the canal. Nevertheless, the die was cast. Even the breakdown in 1998 of negotiations to permit a drug-fighting contingent of U.S. troops to remain in Panama failed to disrupt the transition.

While Americans will be preoccupied on New Year's Eve with the Y2K threat of a worldwide computer failure, it's predictable that Panama's 2.8 million people will be anxiously celebrating their metamorphosis into real nationhood. Theirs has been a country of doubtful legitimacy ever since it was carved out of Colombia by foreign statesmen and speculators intent on connecting the Atlantic and the Pacific. Panama's sense of self was largely defined by its relationship to the North American colossus that created it. For decades, Panamanian politicians loudly demanded ownership of the canal, a sure-fire pitch for popular support, even while their business community eagerly feasted on the advantages of American paternalism.

Now that they are about to get what they have wished for, Panama's leaders face what Mark Falcoff, a resident scholar at the American Enterprise Institute, calls an "identity crisis." Asserting he is "not sure they believe in themselves," especially after relying so long on a U.S. "daddy," Falcoff points to a multitude of problems.

The new president of Panama, Mireya Moscoso, is, in Falcoff's opinion, "the least prepared Latin American leader since Eva Peron." The widow of Panama's three-time president, Arnulfo Arias, she emulates Peron with demagogic promises to rescue one-third of her people from dire poverty. While this is standard political palaver down Panama way, it is woefully ill-timed. Outside investors, already wary, are bound to worry that canal revenues needed for upkeep and improvement of the waterway will be diverted to bottomless-pit welfare.

Endemic problems

Even if Moscoso upholds her pledge of "efficient and responsible" administration of the canal, her ability to wield "efficient and responsible" power is in question. The political opposition controls the legislature and most municipal councils. Corruption, nepotism, money laundering, drug trafficking -- all these remain endemic.

Although U.S. authorities have made it their business to turn over $4 billion in zonal properties in good condition, both the waterway and many buildings within its borders are showing their age. It will be a close thing, according to Falcoff, whether the Panamanian government can sell or lease these properties profitably before a tropical climate, looters and corruption take their toll.

More upbeat assessments come from Ambler Moss, a former U.S. ambassador to Panama, who is now director of the North-South Center at the University of Miami, and C. Richard Nelson, manager of the Atlantic Council's work on Panama.

Moss describes U.S. conduct in turning the canal over to Panama as "a tremendous foreign policy success." It has been marked by good faith on the part of Washington, even when Reagan was president, and has strengthened the U.S. diplomatic position throughout Latin America. Thanks to a $1 billion improvement program, the canal is "in good shape -- largely our doing" and the Panamanians, after a shaky start, are demonstrating an ability to take care of properties in the Canal Zone they are inheriting, Moss says.

Nelson is encouraged by the prospect that the new Panama Canal Authority, supposedly insulated from politics, will be able to operate the waterway as a profit-making business. So long as Americans were in charge, it was run more or less like a public utility by public officials who had scant regard for the feelings or needs of canal users. By offering shippers and merchants new amenities and services, the canal may generate record profits that will lead in a couple of decades to a $9 billion (in current dollars) widening of the canal for modern shipping. "There is no reason," he says, "why Panama can't do as well as Egypt does in running Suez."

Nevertheless, the Atlantic Council has issued a report citing some danger points. The most contentious issue, the council says, is Panama's threatened demand for compensation because 8,000 acres of inaccessible jungle used as a U.S. firing range can't be cleared of unexploded ordnance. "Demands by Panamanians for clean-up at the expense of the United States beyond that contemplated would likely anger many Americans, especially in Congress," the council's report contends. "[This] could poison relations for years to come."

Worries about China

That remark about Congress ought to catch the attention of Panamanian authorities. The radical right in this country, with encouragement from Senate Majority Leader Trent Lott, is warning that Communist China is attempting to challenge U.S. military control of the canal. The basis for this allegation is a contract awarded in 1997 giving the Hong Kong-based shipping company, Hutchison Whampoa, rights to operate shipping facilities in the ports of Balboa, near the Pacific entry to the canal, and Cristobal near the Atlantic entry. Hutchison Whampoa is controlled by the Hong Kong tycoon, Li Ka-shing, a billionaire linked to the Beijing regime, according to the Miami Herald. "We have given the farm away without a shot," Lott complains. Two GOP members of Congress have a Web site in which they stated:

"Communist China has been granted control over port facilities at both ends of the Panama Canal, with power to decide who enters and exits."

Sen. Carl Levin, a Michigan Democrat, called this statement "false" at an Oct. 22 hearing, and White House spokesman Joe Lockhart labeled it "silly stuff."

The Defense Department responds that "we have seen no capability on the part of [China] to disrupt the canal's operations," and the Herald said there is nothing in the contract giving Hutchison Whampoa any part in the operation of the canal. The Atlantic Council's Nelson labeled the whole thing a "red herring -- the China scare all over again," noting that several other companies also operate container ports near entrances to the canal. AEI's Falcoff dismisses the matter as an irrelevance.

More pertinent to U.S. security is the loss of military bases in Panama that have been instrumental in the battle to interdict the flow of narcotics to this country. Not only will this curtail aerial surveillance but Colombian drug smugglers will have even more latitude to roam at will in Panama's Darien Province. Panama has no army, having disbanded its forces after the Noriega overthrow. U.S. drug-fighting czar Barry R. McCaffrey complains that "an enormous hole" has opened in U.S. narcotics defenses. The Pentagon, always eager to shut down expensive bases, is more sanguine.

One note of encouragement is Panama's belated recognition that environmental degradation threatens the viability of the canal. For years, its government did little to prevent squatters from slash-and-burn farming in the watershed. The result: constant runoff leading to dangerous silt buildup in a canal that requires 54 million gallons of fresh water for each of the 12,000 ships that transit the waterway each year.

The United States Energy Information Administration warns that "water shortages could become chronic in the future as a result of rapid development of the canal's watershed that has led to rapid deforestation and water contamination from sewage and industrial waste. Increasing soil erosion will result in greater silt buildup in the lakes that feed the canal."

Hanging over Panama's New Year's Eve will be a fear, a suspicion, a muted comfort that if the country fails this greatest test in its history, the United States will somehow intervene to set things right. This is more than a psychological hangover from nearly a century of dependence on a domineering Uncle Sam. Under the Neutrality Treaty approved in 1978, the United States has the right to use force if necessary to keep the canal open and accessible, with U.S. warships moving to the head of the line for transit in an emergency. While the treaty says the United States cannot intervene in Panama's "internal affairs ... political independence or sovereign integrity," those in the know recognize that the canal is Panama, or at least its essence.

The United States simply will not allow so important a strategic asset to be compromised, either from hostile military threat, environmental catastrophe or operational collapse. Nor would Panama want such a denouement to its nationalistic dreams. So, in this sense, the interests of both countries coincide.

The new Singapore

Decades of U.S. tutelage have helped create a country that uses the dollar as its currency, speaks English for commercial purposes and relies on a sophisticated business community. In that, it has an advantage over its neighbors.

Panama has seen how the Philippines took over U.S. military bases and turned them into thriving centers of industry, trade and shipping. It harbors dreams of becoming the new Singapore -- at least in the economic sphere. If Panama gains sufficient confidence, it may even be in a position to welcome back U.S. troops for drug-fighting purposes or encourage U.S. private contractors to perform canal and shipping tasks botched by public authorities.

Surely the United States should want such a result from a century of awkward dabbling in a form of imperialism that was triumphal in its day but now is outmoded. Panama's government wants President Clinton to make a ceremonial visit next month, but its lobbying may be in vain. White House sources say this is unlikely, despite complaints from Robert A. Pastor, a Carter administration official, of "disgraceful and inconsistent" U.S. treatment of Panama.

When Theodore Roosevelt went to Panama early in this century to observe the mighty construction project he had launched, he was the first president ever to leave these shores while in office. When Jimmy Carter visited seven decades later, he was cheered by huge crowds -- not exactly the kind of Latin greeting that can be guaranteed to U.S. leaders. An absent Bill Clinton would be a telling message to the people of Panama that while they now have full sovereignty over all their territory, their nation has dropped a lot lower on the U.S. attention and priority list.

Joseph R.L. Sterne was, for many years, editorial page editor of The Sun and before that a political and foreign correspondent. He is now senior fellow at the Johns Hopkins Institute for Policy Studies.

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