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Dec 20, 2012 | 20:52 GMT

International Shipping and the Panama Canal

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Global Shipping Routes

The Panama Canal's expansion is scheduled to be completed in 2015. In order to understand the implications of this expansion, it is important to understand the potential for dynamism in global trade routes. Changes in demand, trading partners and even technology can alter these routes. The U.S. Army Corps of Engineers has identified three ways in which the expansion could affect trade in and around the United States. First, the project could allow East Coast ports to better compete with West Coast ports for container shipments from Asia. Traditionally, container shipping from Asia to the East Coast involves intermodal transport: Goods are shipped to the West Coast, then transferred to rail before being transported to their destinations on the East Coast. The widening of the Panama Canal could allow all-water trade to proceed more economically and efficiently by allowing the use of larger vessels. Second, the expansion could lead to the creation of a hub-and-spoke system in the form of regional transshipment hubs, since many Eastern U.S. ports currently cannot accommodate the largest of the post-Panamax vessels. This would allow large ships to arrive at a central transshipment port, where their cargo would then be unloaded and put onto smaller ships that could shuttle the goods to the other ports. Third, though total agriculture exports or even their destinations may not change, the volume of barge traffic toward the Gulf Coast could increase. The Mississippi River is already one of the main arteries used to export grain from the United States. If larger or heavier-laden vessels had the ability to pass through the Panama Canal, it could become more economical to export an even larger amount of grain and goods via the Mississippi River system — including exports destined for Asia — and aid in the United States' price competitiveness in the global grain market. Shifting trade patterns is a slow process and is not as simple as allowing larger ships through a canal. Inland infrastructure and storage may need to be improved or built to accommodate the inflow of goods, and that can take time. Once the Panama Canal expansion is complete, competition for the cheapest, most efficient shipping route can begin.

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