In 1902, the US attempted to purchase the rights to build a canal across the Isthmus of Panama from the Columbian government. When the offer was turned down, Panama (with the encouragement and assistance of the US) revolted against Colombia and signed the Hay-Bunau Varilla Treaty (1903), which gave the U.S. exclusive control of a ten-mile wide canal zone. The United States completed the canal in 1914 and the first vessel, the SS Ancon, made the transit from the Atlantic to the Pacific.

Panama came to resent America's control of the Canal Zone and called the 1903 treaty unfair. Riots along the Canal Zone border erupted in 1964, claiming twenty lives. Panama broke diplomatic relations with the US, prompting President Lyndon Johnson to begin negotiations for a new treaty.

A 1975 Senate resolution reflected continued congressional opposition to the canal negotiations being conducted by Secretary of State Henry Kissinger under the administrations of Richard M. Nixon and Gerald R. Ford. The challenge President Carter faced was to protect basic U.S. interests in an open and secure canal, while also honoring Panama's sovereignty over its own land.

Within days of his inauguration, President Carter ordered a "Policy Review" of the canal treaty negotiations that had been proceeding for thirteen years. Secretary of State Cyrus Vance and Secretary of Defense Harold Brown led the review.

President Carter appointed a US team, led by Ellsworth Bunker and Sol Linowitz, to negotiate general terms of the new treaties. In May 1977, the talks stalled when Panama demanded excessive payments of the United States. In July, President Carter broke the stalemate by writing directly to General Torrijos with the final US offer.

After consulting with other Latin American leaders, Torrijos agreed to the United States' proposals in mid-August.

Amid low public support for the treaties, the Carter Administration began a public relations campaign to secure their ratification in the US Senate. Carter and his officials reached out to U.S. Senators, held many public forums in which they explained the Administration's rationale, and welcomed the support of famed actor John Wayne, who issued his own pro-treaty statement in October 1977.

President Carter joined General Torrijos in Panama on June 16, 1978, to sign the documents concluding the treaty exchange. The ceremony symbolized the beginning of a new era of partnership with Latin America.

As the implementation of the treaties progressed, it became apparent that the transfer of the control of the canal and the US military assets to the government of Panama was to be a successful enterprise. The concerns raised by the opponents of the treaties quickly faded. The use of the canal by aggressors became a less and less plausible scenario as the size of naval vessels outgrew the size of the locks. Also, the transfer of the assets was handled on time and in a safe environment, which had been questioned by many. The U.S. legacy in Panama started with the completion of the canal and ended with the improvements to the Panamanian infrastructure through the treaties. The ratification of the treaties demonstrated the good will of the American people for their neighbors in Latin America. The U.S. efforts in shifting control to Panama, from the ratification of the Panama Canal Treaty in 1977 to the final transfer of December 31, 1999, established effective procedures for treaty implementation.