By Richard Lister in Washington

Perhaps more than any other engineering project, the Panama Canal has been a blunt reminder of one nation's dominance in the world.

Washington helped carve the nation of Panama from Colombia in 1903 in order to gain control of the canal route.

Eleven years later it had linked the Atlantic and the Pacific with a 50-mile canal through the heart of the jungle.

Even though it slices Panama in two, the canal has always been owned, controlled and operated by the United States. That will change at the end of the year, when the United States fulfils the treaty signed by Presidents Carter and Torrijos in 1977 and hands the waterway to Panama.

The 1977 treaty, drawn up as a result of increasing nationalist pressure from Panama, has never been particularly popular in the United States: in the words of one former US Joint Chiefs of Staff, Admiral Thomas H. Moorer "We built it, we paid for it, we use it".

But although used by some 15,000 vessels a year, it is less important than it once was. Some 10% of the world's container ships are too big to go through the canal, and railways now carry much of its cargo.

Nevertheless as the "belt buckle" of the Western Hemisphere, it still has considerable strategic importance.

Howard Air Force Base in the Canal Zone had been the hub for US anti-drug efforts in Latin America; now that it has closed, the US is scrambling to find other bases to launch anti-narcotics missions.

Port control

But more sinister to many Republican eyes is the fact that a Hong Kong company, Hutchison Whampoa, won the right to control a port facility at each end of the canal after a somewhat murky bidding process.

The Clinton administration denies that the firm has links to the Chinese government, but President Clinton did nothing to calm the controversy when he commented: "I think the Chinese will in fact be bending over backward to make sure they run it in a competent able and fair manner".

The State Department later stressed that Hutchison Whampoa will not in fact be "running" the canal, just two of its ports.

Admiral Moorer has warned that China could use the facilities to base missiles in Panama - something denied by the company, and the governments in Washington and Beijing.

Opinion polls show that the majority of people in Panama are also concerned by the loss of the American presence.

While sovereignty over the canal is a matter of intense national pride, the local economy is already suffering from the departure of thousands of American troops.

There are fears too that without the US presence, the small country could be dragged deeper into the narco-economy of neighbouring Colombia.

After almost a century of American imperialism in Panama, both sides are now looking to a new but uncertain future.