The Panama Canal was a marvel of international communication, forward thinking, and was vital to the expedited movement of goods between the Atlantic coast and the Pacific coast spearheaded by President Theodore Roosevelt in 1903 (Office of the Historian, 2016). Completed in 1914, the Panama Canal revolutionized transportation, shipping, supply chains, and business operations worldwide (Office of the Historian, 2016). Called “the largest project at the Canal since its original construction, the Panama Canal Expansion project was the contract awarded in 2007 and work was started in 2009 (Canal De Panama, 2016, p. 1). As of June of this year, the newly expanded Panama Canal was officially open for business (Mufson, 2016). In spite of the several billion dollar price tag associated with the work, the benefits associated with the project completion, and the approval and completion of the project itself, there are still some concerns regarding how the expanded Canal will effect world trade, other modes of transportation, the US economy, and the US infrastructure.
Looking first to the positive effects on world trade, it is anticipated that the project will afford increased traffic to ports that have the capabilities of handling increased traffic and larger sized ships, providing additional revenue to those ports and economic areas (Dengo, n.d.; Robinson, n.d.). Furthermore, there is a lower associated operating cost with the expanded Canal, lower costs of transportation for companies that only operate using the larger cargo ships that would not previously have been able to utilize the Canal, and increased incentives for multinational corporations that wish to utilize the lock in the completion of their business shipping transactions (Dengo, n.d.; Robinson, n.d.).
The negative effects that are believed possible as a result of the opening of the expanded Canal include increased risks that the Canal will become a target for terrorist activity and increased potential for wrecks, which in turn could increase the likelihood of a shutdown of the canal due to clean up (Ross, 2014). With the project running over its estimated budget by more than 1 billion dollars, these risks are very real, including the concerns that are felt by the pilots who take full responsibility for the navigation of ships through the locks (Ross, 2014). Increased pressure, increased liability, and increased burnout are all very real negative potentials, especially when taking into consideration that there were, as of 2014, only 285 individuals who were cleared to act as pilots for the Canal, a job that includes landing on ships via helicopter in all weather conditions, high stress, little sleep, and even comes with the likelihood of broken bones under poor conditions (Ross, 2014).
These positive and negative effects described, however, are only those that affect world trade. When looking at how the canal will affect other modes of transportation, the matter is one not without cause for concern. While transportation by air is quicker, transportation by sea is cheaper (Ross, 2014), but the expansion of the canal continues to cause issues for Union Pacific (Trefis Team, 2015). The railway giant takes approximately 20% of its revenues from freight transport, but with the expansion of the Canal, those numbers are anticipated to decrease (Trefis Team, 2015).
Still of further concern is the fact that US infrastructure is already being affected, with certain ports already overrun, real estate agents expecting a flood of calls, and a lack of resources to be able to immediately address concerns, concerns that have been brought about by traffic increasing beyond imagine (Mufson, 2016). One thing is for certain about the expansion, however; ports on both coasts of the US have already started to see high levels of increased traffic, with projections for continued and additional revenue indicating a high level of promise for the US economy (Mufson, 2016; Robinson, n.d.).
- Canal De Panama. (2016). Official Website for the Panama Canal Expansion. Micanaldepanama.com. Retrieved 4 September 2016, from https://micanaldepanama.com/expansion/
- Dengo, M. The Panama Canal expansion and its impact on world trade (pp. 12-13). Port Technology International.
- Mufson, S. (2016). An expanded Panama Canal opens for giant ships. Washington Post. Retrieved 4 September 2016, from https://www.washingtonpost.com/world/the_americas/an-expanded-panama-canal-opens-for-giant-ships/2016/06/26/11a93574-37d1-11e6-af02-1df55f0c77ff_story.html
- Office of the Historian. (2016). Milestones: 1899–1913. History.state.gov. Retrieved 4 September 2016, from https://history.state.gov/milestones/1899-1913/panama-canal
- Robinson, C. Wide Open: How the Panama Canal Expansion is Redrawing the Logistics Map (pp. 1-16). Boston, MA: BCG.
- Ross, R. (2014). Bigger Ships, Bigger Risks. Newsweek. Retrieved 4 September 2016, from http://www.newsweek.com/2014/07/25/bigger-ships-bigger-risks-expansion-panama-canal-brings-opportunities-and-259600.html
- Trefis Team. (2015). The Potential Impact Of The Panama Canal Expansion On Union Pacific. Forbes.com. Retrieved 4 September 2016, from http://www.forbes.com/sites/greatspeculations/2015/11/23/the-potential-impact-of-the-panama-canal-expansion-on-union-pacific/#3221f22021bc