Was listening to a podcast about the Panama Canal this morning.. The US was the mastermind behind the design and build of such an engineering feat and expended millions of dollars (probably the equivalent of billions today) in the process. I imagine it's also a huge money maker through toll fees. Seems unfair to give it away for the sole reason that it's on their soil. Shouldn't some kind of compromise been made? Where profits are shared between the two countries?
I also just noticed a transcript of an interesting interview with former Secretary of State Dean Rusk linked on the Panama Canal's wikipedia page. The section discussing Panama starts on page 37.
He explains that America's interests in Panama are primarily in the security and the efficient operation of the canal. While the profits from tolls have to be quite high (and I think I saw a figure in the $1b range), we have to imagine the economic benefits for international trade far outweigh whatever loss in profits would result. I looked around for a figure of what the canal means for the global and US economy, but I suspect that would be difficult to quantify. If anyone can find them, I'd love to see the numbers.
For a long time, the best case for stability and functionality of the canal was to have it in US hands.
However, that came into question after January 9th, 1964, when a riot broke out following a scuffle between protesting Panamanians and the Canal Zone guards. After the death of 25 (21 Panamanians and 4 US Soldiers), the international backlash was harsh against the Americans.
The control of the canal also had some strange colonial overtones that hurt the US's position rhetorically. As Rusk explains, "If you were negotiating a fresh treaty today, you would not possibly find a country willing to give you a piece of its territory in which you would carry out all the acts of sovereignty as though we were sovereign, as the [1903] treaty puts it."
If American interests are primarily in the security and smooth operation of the canal, then growing tensions over American control might threaten those interests. We have to remember that we're living in the aftermath of the ugly Suez Crisis.
To avoid any further conflict, it was in the best interest of America to cede control of the canal, which is what Carter ultimately did in 1977 with the Torrijos-Carter Treaties. The treaties also included the US's right to defend the canal from any threat to international trade.
For more reading on the canal, David McCullough's tome on its construction is worth a read (published just after the treaties were passed). And definitely go back and look at that oral history with Dean Rusk.
Additionally, President Carter's comments at the signing of the treaties provide a bit of insight into the need for such a valuable piece of the international community to remain open.