- The Washington Times - Monday, December 30, 2002

PANAMA CITY A country known for its hats, bananas and dictators has become a battleground for Taiwan and China, wealthy adversaries aggressively bidding for friends and influence a hemisphere away.
Panama is one of the few countries that has diplomatic relations with Taiwan. But the presence of the Panama Canal gives China too big a stake to walk away in protest.
That puts Panama in a position to cash in much in the same way that developing nations during the Cold War played the United States against the Soviet Union.
Panama has excellent economic relations with both, said Harmodio Arias, the deputy foreign minister.
"We believe the problem is with the two Chinas, and it is none of our business," Mr. Arias said.
In recent years, Chinese companies have invested $200 million in Panama, with millions more pledged.
Among the most prominent, Hong Kong-based Hutchison Whampoa, a huge Hong Kong conglomerate with close ties to the Chinese leadership in Beijing, invested more than $120 million to renovate ports on both ends of the canal. Canal traffic is sailing along, with 13,492 ships in 2001, up 2.5 percent from 1999. In the same period, tolls collected rose 2 percent, to $579.5 million.
"Any gain by Taiwan is magnified 10 times as a loss for Beijing. With its canal, Panama is the most significant country of Taiwan's 27 formal diplomatic allies," said Elizabeth Economy, director of Asia Studies at the Council on Foreign Relations, a New York think tank.
Nations that recognize Taiwan, officially known as the Republic of China, include Chad, Liberia and other aid-hungry nations.
But few stand to benefit as much as Panama, which in the past five years has reaped more than $450 million in investment and foreign aid from Taiwan.
In return, Panama sponsored Taiwan's bid this fall to enter the United Nations a quixotic effort given China's opposition, which nevertheless helped Taiwan raise its diplomatic profile.
Mainland China, officially known as the People's Republic of China, regards Taiwan as a renegade province, split off since 1949, when China's Nationalist party fled to the island ahead of advancing communist troops.
A key goal of Beijing's foreign policy is to squeeze Taiwan from the world stage, keeping it out of the United Nations and other organizations and, when possible, punishing nations that formally recognize Taiwan.
Lacking formal diplomatic status, China has attempted to use its commercial clout to persuade Panama to switch ties from Taiwan.
China has become the third-largest user of the Panama Canal, with traffic predicted to grow with the mainland's entry into the World Trade Organization.
But when it comes to global shipping, Taiwan is no lightweight.
Evergreen Marine Group, a Taiwanese shipping giant, has invested $110 million to convert an old U.S. submarine base into a port.
The Hutchison port concession made some U.S. legislators angry. They argued that the company's connections to Beijing made it a threat to U.S. national security.
Rep. Dana Rohrabacher, California Republican and one of the outspoken critics of the Chinese presence in Panama, says he remains concerned.
"What powers make the decisions during crisis moments? That would not be the U.S.," he said. "We have people who are hostile to national security interests, who have leverage.
"If Beijing wanted to apply pressure, Chinese-owned ships could clog the waterway, and its workers could go on strike," he said.
Others disagree. "It's very seductive to say the Chinese are coming, Hong Kong is in the canal," said Cynthia Watson, a professor at the Naval War College in Washington.
"But are we worried about the Chinese in Vancouver? Chinese officials say that some companies hesitate to invest in Panama without the security of diplomatic protection, a disingenuous argument, considering the tremendous cross-Strait trade between China and Taiwan."
China and Taiwan are courting Panama's ethnic Chinese community, about 200,000 people in a nation of 2.8 million, whose ancestors arrived 150 years ago as laborers.
When Republic of China (Taiwan) President Chen Shui-bian recently paid a state visit to Panama, he dropped off a $50,000 donation at the Chinese Cultural Center.
The center was built with a $2 million gift from Taiwan. The sprawling complex includes an elementary and high school, and symbolizes Taiwan's largesse to Panama's Chinese community.
Li Yonglu, China's trade representative and de facto ambassador to Panama, dismissed Taiwan's efforts as ineffective.
He said that 95 percent of Chinese-Panamanians support reunification of Taiwan with mainland China because of the community's ancestral origins in the mainland.
In trying to claim the loyalties of the local Chinese population, the rivals take every opportunity to one-up each other.
After Taiwan brought over Peking-style acrobats, China leaped to bring a troupe of its own.
For years, Taiwan held its National Day celebration at a swanky hotel Oct. 10.
When China decided to throw a fete of its own just nine days earlier, it used the same hotel.
Celebrations for the past Chinese New Year were almost canceled because of the China-Taiwan rivalry. Instead, the Chinese community settled on three separate celebrations one for the Chinese, one for the Taiwanese and one just for the locals.

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