"Today we are gathered in the spirit of mutual respect, acknowledging without question the full sovereignty of Panama," Mr. Carter told hundreds of Panamanian and foreign dignitaries gathered under a light rain at the Miraflores Locks at the canal's Pacific entrance.
With President Clinton and Secretary of State Madeleine Albright conspicuously absent, Mr. Carter led the U.S. delegation at the transfer ceremony. He and Panamanian President Mireya Moscoso signed a symbolic accord marking the canal's passage to Panama, calling it a pivotal moment in the history of the hemisphere,
The official transfer of power will take place Dec. 31; the proceedings were moved up to avoid conflicts with millennium celebrations.
Earlier, Mr. Carter, who negotiated the Panama Canal treaties 22 years ago, laid a wreath at an American military cemetery on the banks of the canal in honor of 5,000 Americans who gave their lives building and defending it.
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Albright was to have been the highest-ranking U.S. official at Tuesday's events. She canceled plans to attend and remained in Washington for upcoming Mideast peace talks, the State Department said.
In Washington, President Clinton expressed a "continuing commitment" to the canal's security and a determination that the strategic waterway reain open for global commerce.
"Today's ceremony underscores our confidence in the government of Panama and the Panamanian people's ability to manage this vital artery of commerce," Mr. Clinton said in a written statement.
But, reports CBS News Correspondent Jim Axelrod many Panamanians are mystified why their longtime partner is assigning such a low profile to an event that seemed to speak so loudly about future U.S. intentions in the region.
"We regret that President Clinton has not come to this event, which is unique and historic for Panama and the United States,'' Moscoso told reporters after receiving Spain's King Juan Carlos at Panama City's international airport on Monday.
The White House denied that President Clinton snubbed Panama by skipping Tuesday's ceremonies. "There are many trips that he wants to take, that he believes are important, that we just can't do. This fits that category," spokesman Joe Lockhart said.
The treaties transfer to Panama 360,240 acres of real estate that made up the Canal Zone, a fenced-in U.S. civilian and military enclave with schools, churches and federal laws. Its crown jewel was the canal, a 50-mile engineering marvel that raises ships from one ocean and deposits them in another through a system of water locks and a man-made lake.
About 14,000 ships pass through the canal every year, steered by Panamanian or U.S. pilots, and pay $540 million in tolls.
Mr. Carter signed the treaties in 1977 with Panamanian strongman Gen. Omar Torrijos, who 10 years earlier had come to power through a military coup. While Mr. Carter was criticized in the United States, the treaties polished Torrijos' image internationally and made him a national hero. Torrijos died in a plane crash in 1981.
The transfer comes amid some concerns about its security after Colombian guerrillas killed 45 Marines on Sunday in an assault on a naval base at Jurado, close to Panama's border.
"The Panama Canal will be safe in Panamanian hands ... I hope that within a year we can make it work as efficiently or more so than has been the case for the past 85 years,'' said Canal Minister Ricardo Martinelli.