The Giant New Panama Canal Will Change the Global Economy (Again)

The Giant New Panama Canal Will Change the Global Economy (Again)

By Kelsey Campbell-Dollaghan on 10 Jul 2015 at 7:00AM

A few months ago, hundreds of tourists, sightseers, and workers in Panama City crowded into a deep canyon of concrete to witness another wonder of the world before it was submerged.

At 11-stories deep, these canyons made of rough concrete could have been a lost Louis Kahn structure. In fact, they were the newly-enlarged locks of the Panama Canal, which is finishing up a huge expansion project this summer. As City Lab’s Laura Bliss pointed out yesterday, the expansion project is nearly complete, with engineers flooding the new locks in May. It’s been underway since 2007, and has cost £3.41 billion, all in order to accommodate the size of a new generation of container ships called New Panamax, which can wedge into the new 1,400-foot-long locks.

What’s really interesting about this project, though, is that it’s going to pretty drastically change how the economy of the US—and the world—flows across the globe. A report from the Boston Consulting Group explains how:

According to research conducted jointly by The Boston Consulting Group and C.H. Robinson, as much as 10 per cent of container traffic between East Asia and the U.S. could shift from West Coast ports to East Coast ports by the year 2020.

This shift will have profound effects. The larger ports on the West Coast will experience lower growth rates, altering the competitive balance between West Coast ports and East Coast ports. (With global container flows rising, West Coast ports will still handle more containers than they do today.) It will also shape the investment and routing decisions of rail and truck carriers, magnify the trade-offs that shippers make between the cost and the speed of transportation, and potentially alter the location of distribution centres.

Whoa. Right now, most of the goods that flow into the US come into the country through ports on the West Coast—and then flow across the country through a series of railways and motorways. When the port’s expansion opens next year, that will change.

[Boston Consulting Group; h/t City Lab]

Visitors to the locks, before they were flooded, in May. AP Photo/Arnulfo Franco.

A rolling gate is installed at one of the new locks in April. AP Photo/Arnulfo Franco.

The canal from the air in April. AP Photo/Pablo Martinez Monsivais.

Flooding the locks in June. AP Photo/Tito Herrera.

The flooded locks being tested this week. AP Photo/Arnulfo Franco.

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