How Wil the Panama Canal Expansion Impact US Foreign Trade? The question is on the mind of many industry insiders. How will an expanded Panama Canal impact the US economy, and the coastal and inland waterways in particular? The Panama Canal Authority’s third set of locks is scheduled to open in 2014, enabling it to accommodate much larger vessels and more annual transits. The actual impact of the Panama Canal expansion on US foreign trade routes is the subject of significant uncertainty among experts due to a broad range of difficult-to-predict factors. These include the responses of West Coast ports and western railroads to new competition from all-water services to the East, the effects of slow steaming on cargo inventory costs, and the readiness of East and Gulf Coast ports to handle very large ships. In this, the first of a three-part series, the authors describe some of the variables that will ultimately determine the impact of the Panama Canal expansion on the US economy.
Part 1 of 3 By Randolph R. Resor USDOT Policy Advisor and Eric Gabler US Maritime Administration Economist
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he Panama Canal was opened in 1914, just at the start of the First World War. During the war years, only about 2,000 ships a year transited the Canal, but this volume grew rapidly after the Armistice to an average of more than 5,000 transits during the 1920s. While the “path between the seas” was a major American engineering accomplishment, by the 1930s there were already concerns about the size of the locks (110 feet wide by 1,050 feet long). A new class of US Navy battleships, the “Montana” class, was proposed in the late 1930s. With a beam of 121 feet, these vessels would have been unable to navigate the Canal. In 1939, with the delivery of the first Montana-class battleship scheduled for 1945, Congress approved funds for construction of a new set of larger-capacity locks for the Canal. Numerous studies had been undertaken, as early as the 1920s, on constructing new locks, converting the canal to a sea-level passage, or building a new canal in another location. Nicaragua was the choice of many groups sent to study the issue. But the least costly and quickest alternative for
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2011 Issue VI