Published daily by the Lowy Institute


Trump goes deep into the Panama Canal

The canal authority recovered from a severe drought through much of 2024 that slashed the rate of ships transits (Arnulfo Franco/AFP via Getty Images)
The canal authority recovered from a severe drought through much of 2024 that slashed the rate of ships transits (Arnulfo Franco/AFP via Getty Images)
Published 14 Jan 2025 12:00    0 Comments

Chinese soldiers do not operate the Panama Canal. And the Panama government is not ripping off the consumers of the United States through inflated shipping rates.

That’s the only possible conclusion from an impartial look at how this historic waterway works. Yet on the basis of these claims by US president-elect Donald Trump, he is threatening to annex the 80-kilometre canal that joins the Atlantic and Pacific Oceans, connects more than 140 shipping routes and 1,700 ports worldwide, and provides the transit for about three percent of global trade.

For good measure Trump has not ruled out military force to seize the waterway that was handed over to Panamanian control in 1999 in the wake of a treaty signed by the late president Jimmy Carter, a measure that Trump now labels “a big mistake”.

At one stroke the incoming occupant of the White House raised the level of international tensions as measured by the World Economic Council’s Global Cooperation Barometer, a useful yardstick for assessing how nations work together in a variety of areas. The barometer’s latest reading shows that “international cooperation has flatlined, driven by heightened geopolitical tensions and instability”, albeit noting positive momentum in other areas such as climate finance, health and innovation.

The canal authority’s next two biggest customers after America – China and Japan – aren’t complaining.

It didn’t help the barometer that at around the same time Trump expressed interest in buying or annexing Greenland, a self-governing territory of Denmark, which has no intention of parting with it.

Although the Panamanian government has calmly brushed aside Trump’s threats, experienced observers see his claims as extremely harmful to American interests. As a former US ambassador to Poland, Daniel Fried, wrote in Atlantic Council this month: “[They] reveal a dark side of power unworthy of any US president. Put into practice, they would reduce the United States to a mere bully that rules through force and fear, assuredly triggering a reaction against it, as well as ending US alliances. That’s quite a degeneration from the tradition that Trump inherits.”

While Fried surmises that these threats “may be bluster or tactical”, he argues that they take America back to the darker days of the 19th century when power came through territorial conquest.

Info graphic on Panama Canal

Trump is probably not aware of the pride Panama takes at its largely successful operation of the waterway. The canal authority recovered from a severe drought through much of 2024 that slashed the rate of ships transits and, as its latest financial statements show, has drawn up plans to avoid a repetition while also investing heavily in future sources of revenue such as a parallel fuel pipeline running the length of the canal.

Incidentally, this would be very much in US interests because Panama’s president Jose Raul Mulino wants to increase volumes of American oil via the waterway as one of several initiatives to find alternative income streams.

But are its revenues “ridiculous and highly unfair”, as Trump argues? Last financial year’s total revenues of nearly US$5 billion reflect a compound annual growth of nine percent, up $1.8 billion over five years. Net earnings, or roughly profits, total $3.85 billion, up 18 per cent. That represents a healthy operating margin of over 62 per cent.

That may suggest there’s room for negotiation over rates, except that the canal authority’s next two biggest customers after America – China and Japan – aren’t complaining. Also, the authority aims to become net-zero by 2050 and has set aside $8.5 billion to get there.

Anyway, the Panama government has dug in its heels. An exasperated Mulino, who said “for the love of God, there are no Chinese soldiers in the canal”, told a celebration on 31 December marking 25 years since the handover that “it will stay in our control for ever”. And he added that there was no possibility tolls would be reduced for US ships.

Still, Trump has appointed a minor 34 year-old Miami official – and local campaign organiser – as his ambassador in the republic. Son of Cuban exiles, Kevin Marino Cabrera is under instructions to get the toll rates down.


The practical obstacles to Canada as the 51st state

Canadian provinces are fiercely independent and protective of their powers in a way that would make even the most fervent “state rights” advocates in the United States blush (David Ryder/Bloomberg via Getty Images)
Canadian provinces are fiercely independent and protective of their powers in a way that would make even the most fervent “state rights” advocates in the United States blush (David Ryder/Bloomberg via Getty Images)
Published 14 Jan 2025 02:00    0 Comments

Donald Trump’s proclamation about reshaping North America and having Canada become “the 51st state” is but one land grab by the soon-to-be returned president. This may just be another of Trump’s distractions, more attention-seeking, or a negotiation tactic. Or maybe he sees annexing Canada as a simple real estate transaction. Yet as a demonstration, it’s worth considering how complex it would be to incorporate Canada into America’s political institutions.

The 50 current states would consider Canada, was it to remain a single state, an enormous threat to their own weight within the republic. Canada would be the largest state in terms of population, and second largest economy. Its influence would be massive, and it would fundamentally reshape the balance of power within the country.

Therefore, the more acceptable scenario would be for each of Canada’s ten provinces to join the union as separate states. Although getting them to submit to a new delineation of powers would be a struggle – as Canada has evolved to greater decentralisation of power.

Canadian provinces are fiercely independent and protective of their powers in a way that would make even the most fervent “state rights” advocates in the United States blush. This is not only in Quebec – the centre of Canada’s large francophone minority, where the separatist Parti Québécois have a commanding lead in current polling – but also in Alberta and Saskatchewan, who view Ottawa as little more than a parasite leeching off their oil wealth. A perspective that would hardly be tempered by Washington becoming the new tax collector.

Behind their polite demeanours, Canadians are essentially a nation of cats resistant to being organised.

Therefore, provinces having to reevaluate their own weight and powers within the United States would cause great resistance. While Ontario could nestle in between New York and Pennsylvania as the fifth largest state and be able to exert itself, the union would be less advantageous for tiny Prince Edward Island (PEI) with its population of 180,000. PEI has a sweet constitutional deal in Canada, guaranteeing it four seats in the federal parliament when its population is less than some single seats elsewhere in the country. It’s unlikely that the United States would be so generous.

The next hurdle would be the idiosyncratic spirits of Canadian voters being unlikely to submit themselves to America’s binary party system. Canadians live in a permanent revolt against Duverger’s Law – that single member districts using first-past-the-post voting will lead to a two party system. By contrast, Americans – both structurally and mentally – live in permanent submission to it.

Indeed, the threat of multi-party democracy may just be the thing to ward the Americans off. Aside from its one constant in the shape-shifting cockroach that is the Liberal Party, Canada’s party system is frequently in flux. Currently, the federal parliament is host to five political parties, but at provincial level politics often bears little resemblance to federal politics, with an array of distinct and federally unaffiliated parties. The Canadian electorate sees different parties serving different purposes at each level of government – with exerting regional identity its core political feature.

Behind their polite demeanours, Canadians are essentially a nation of cats resistant to being organised. The country is incapable of even negotiating a free trade agreement within its own borders. While Washington may hold a stronger whip hand than Ottawa, it would also be importing a new set of demographics and interest groups that it may be unequipped or uninclined to accommodate.

It is unlikely, for instance, that the United States would become a bilingual state. Even with Canada’s eight million francophones, there would still be more Spanish speakers in the United States. But would francophones have the right to speak French in Congress? Would citizens have the right to engage with the federal government in French? Or the right to federal court cases being conducted in French?

Denial of such rights would create incredibly fertile soil for Quebec separatism. Would Washington allow Quebec to hold a referendum on sovereignty? Would it accept the result? Quebec is a water resources superpower, and Hydro-Québec is the world’s third largest hydropower producer. Is this something that the US government would be willing to give up once it had gained control? The potential to return Quebec to the volatility and violence of the 1960s to early 1970s would be high.

Alongside the rights of francophones lies the protections and agreements that Canada has made with First Nations, Métis and Inuit peoples. Section 35 of Canada’s constitution has been interpreted by the Supreme Court as affording a range of cultural, social, political, and economic rights to these peoples. Including the right to land, and fishing and hunting rights outside of other regulations. These groups would resist having to renegotiate these terms with another, more distant, state.

It is unlikely Trump has any understanding of these issues and their complexity. He simply points at what he wants and expects to get it. And he often does. However, while Canadians may have a weak sense of national identity, the one thing that binds the country is their “affable anti-Americanism”. Which may ultimately prove a force more powerful than even Trump’s irrepressible will.


The legal options for Trump to acquire Greenland

Donald Trump Jr arrives in Nuuk, Greenland on 7 January 2025 aboard a private jet as his father as president-elect talks about the US need to acquire Greenland (Emil Stach via AFP/Getty Images)
Donald Trump Jr arrives in Nuuk, Greenland on 7 January 2025 aboard a private jet as his father as president-elect talks about the US need to acquire Greenland (Emil Stach via AFP/Getty Images)
Published 13 Jan 2025 10:30    0 Comments

Acquiring Greenland would now appear to be a foreign policy priority for the incoming Trump administration. Reviving his 2019 proposal for a US takeover of the territory, an idea thought to have been shelved following his 2020 election loss, Trump last week made his ambition for Greenland plain.

Greenland is part of Denmark and a territory within the Danish realm. Despite doubts that have been cast over Copenhagen’s sovereignty, in 1933 an International Court ruled in favour of Denmark in a dispute with Norway over title to the world’s largest island. That ruling has been continually accepted in the years since and there are no competing claims by other Arctic states, including the United States.

There is an American military base in Greenland – the Pituffik Space Base formerly known as Thule Air Base. The base was originally constructed in 1951 during the Cold War, with Denmark one of the founding members of NATO. The role and mission for the base has evolved over time, but there have been no recent public discussions regarding an expansion of the base, or the building of additional US military facilities in Greenland. Yet these are all possibilities following negotiation with Denmark, and the US has many such arrangements in place globally.

So given that the US already has a military presence in Greenland, what is the driver for Trump’s interest in the island?

National security has been given as a justification, and Trump has made specific reference to Chinese and Russian ships in the vicinity of Greenland. Russia is of course an Arctic state, and China is seeking to advance its position as a “near-Arctic State” and has increasingly become active in the region. However, both Chinese and Russian ships enjoy the freedom of navigation consistent with the international law of the sea, a right which the United States regularly asserts especially in the South China Sea. Any US efforts to control the freedom of navigation adjacent to Greenland would therefore be counterproductive to its strategic goals elsewhere.

In recent years it was always understood that Greenland was gradually moving towards independence and while no timetable has been set, negotiations have been ongoing.

Greenland is also known to have reserves of rare earth minerals. As climate change continues its impact and the Greenland ice sheet gradually melts, these minerals are becoming more accessible. The United States would certainly have an interest in gaining access to these minerals, and there are existing legal frameworks and policies in place that already allow for some mining to occur in Greenland. However, Trump would be mindful that across parts of the Arctic there is a strong environmental consciousness that may resist any large-scale mining activity. This runs counter to Trump’s “drill baby drill” slogan that he has sought to promote for Alaska and in American waters.

How then could the US acquire more permanent and substantial interests in Greenland consistent with international law? There is always the prospect of cession, whereby Denmark would agree to transfer Greenland to the United States. While there is a long history of territory being ceded in this manner, Copenhagen has made clear that Greenland is “not for sale”. Greenlanders would need to be consulted about this option, and it is unlikely they would agree to shelve their own national aspirations and become a strategic pawn in great power rivalry.

Greenland is well advanced on a path to independence. The momentum behind that movement needs to both be respected and understood for the opportunities it presents. Greenland’s political and legal background and status here is important. Greenland was a post-Second World War UN non self-governing territory, and formally became part of the Danish Realm in 1953, and transitioned to “Home Rule” in 1978. Under this arrangement Greenland is recognised as a “distinct community”, which was further advanced by the 2009 Greenland Self-Government Act that further extended Home Rule to encompass certain matters associated with Greenland’s foreign relations. Nevertheless, Copenhagen retains ultimate responsibility for the island including for its defence and security. In recent years it was always understood that Greenland was gradually moving towards independence and while no timetable has been set, negotiations have been ongoing between the Greenland government and Copenhagen to achieve this outcome.

An independent Greenland presents an opportunity for the United States to achieve some of the goals that Trump aspires to. US practice with other islands is instructive. The US has up to six different existing categories for the legal and constitutional status of an “insular area”; that is territory that is neither part of a US state or a federal district. These categories include Commonwealth status, incorporated territory, unincorporated territory, organised territory, and unorganised territory, and encompass islands as diverse as Puerto Rico and the United States Virgin Islands. The US also has in place separate “Compact of Free Association” arrangements with the Federated States of Micronesia, Republic of the Marshall Islands, and Palau. These Pacific countries are all recognised as independent and are UN member States, but their defence and security and certain aspects of their international relations rest with the United States.

This is a model that could be applied to an independent Greenland. Self-determination processes between Copenhagen and the Greenland government in Nuuk could be fast tracked to result in Greenland’s independence sooner than was anticipated, while at the same time negotiations were being advanced with Washington for a Compact of Free Association. Ultimately this is a matter for decision by Greenland and whether any proposed Compact with the United States is an act of free choice by Greenlanders.