The Panama Canal expansion project, which was initially scheduled to be completed in 2014, 100 years after its first opening, has been delayed for a number of reasons. Nevertheless, on December 31 last year the Panama Canal Authority said its new locks are expected to be tested at the end of 2015 and be ready for commercial transit in early 2016. Are American ports ready?

In 1881, France began working on the canal but discontinued efforts after encountering engineering problems and staggering death rates due to disease. The United States, which took over the project in 1904, completed the canal in 1914.

A century later, the expansion of the canal will accommodate Post-Panamax vessels: ships 235 feet longer and 54 feet wider than the Panama vessels that can handle up to 12,600 TEUs — twenty-foot equivalent unit shipping containers 20’ x 8’ x 8.5’. By undertaking its current expansion, Panama will double its canal’s capacity.

To handle Post-Panamax vessels, dredging and upgrading berthing areas to 50-foot depths is required in most American ports, as well as replacing gantry cranes with cranes having the height and reach to unload taller and wider container vessels, says Colliers International, a leader in commercial real estate. Plus, other infrastructure improvements, including the raising of surrounding bridges, need to be made in some cases.

It is estimated that more than 70 percent of U.S. container traffic from Asia passes through Pacific ports, and as much as a third of those containers travel through Los Angeles and Long Beach. But once the expansion project is completed, container ships traversing through the Panama Canal from Asia will be able to make port calls at American ports in the South and East Coast. However, only a few of these ports are Post-Panamax ready; others are racing to catch up.

While port authorities and their private sector partners planned over $46 billion in capital improvements from 2013 through 2016, The American Society of Civil Engineers says federal funding has declined for navigable waterways and landslide freight connections needed to move goods to and from the ports. As a result of this and other factors, The American Society of Civil Engineers’ last report card, published in 2013, gave American ports a grade of “C.”

It’s not just America’s ports that are in need of repair. We are at a pivotal moment when it comes to modernizing our nation’s infrastructure.

But it’s not just America’s ports that are in need of repair and updating. “We are at a pivotal moment when it comes to maintaining and modernizing our nation’s infrastructure. Many of our roads, bridges, water systems, and our national electric grid were put into place over fifty years ago, and these systems are simply overwhelmed or worn out,” says Gregory E. DiLoreto, President of The American Society of Civil Engineers. The 2013 Report Card for America’s Infrastructure gives an overall grade of D+ across 16 categories, up just slightly from the D given in the organization’s 2009 report card. This slight improvement is due to upgrades and repairs resulting from an increase in private, state and federal targeted investments.

The movement of goods across the United States, which will continue to accelerate due to a projected increase in imports and exports, will put greater stress on an already fatigued system of American roads, highways and bridges. In fact, according to the report Freight Facts and Figures 2013 published by the U.S. Department of Transportation, the U.S. movement of tonnage due to international trade is projected to grow at an annual rate of 3.4 percent between 2007 and 2040.

“Over two hundred million trips are taken daily across deficient bridges in the nation’s 102 largest metropolitan regions. In total, one in nine of the nation’s bridges are rated as structurally deficient, while the average age of the nation’s 607,380 bridges is currently 42 years,” The American Society of Civil Engineers reports.

“Transportation systems are the backbone of America: They keep our nation strong and moving. But we have not been taking good care of this resource. Lacking a coherent vision for our transportation future and chronically short of resources, we defer new investments, fail to plan and allow existing systems to fall into disrepair,” says the Miller Center of Public Affairs at the University of Virginia.

In The Spotlight

In 1966, President Lyndon B. Johnson stated that “Modern transportation can be the rapid conduit of economic growth — or a bottleneck.” In recent years, it appears to have become a bottleneck.

The Miller Center says “Our chief trading partners are making significant investments in their transportation infrastructure; America must do the same to remain competitive.” To compete with emerging economic powerhouses like China, the United States needs to become more efficient. And this includes making investments in all transportation infrastructure. Not surprisingly, of the world’s largest container ports measured in TEUs in 2013, Los Angeles and Long Beach ranked among the world’s 19th and 21st largest ports. The Port of New York/New Jersey ranked 27th. Ten Chinese ports ranked in the top 18.

A failure to improve America’s infrastructure, especially its ports, will have a tremendous negative impact. According to a 2012 report by The American Society of Civil Engineers, “If America only maintains its current level of investment in these systems, the losses to its economy will increase shipping costs annually. By 2020, lost value of exports will be $270 billion and will rise to almost $2 trillion by 2040. The cumulative loss in national GDP will be about $700 billion by 2020 and reach $4 trillion by 2040.”

Over the years, other losses resulting from West Coast strikes involving shipowners and longshoremen have taken a toll. And the recent dispute, which appears to have been resolved with a tentative agreement reached in late February 2015, is a reminder of the risks posed by West Coast ports that could lesson as shipowners make the decision to pass through the Panama Canal for East Coast ports.

This articles appeared in Global Impact, a Great American Insurance Group publication.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.

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