The Panama Canal’s Expansion Effects on Global Shipping
In 1903 the United States provided military backup enabling
Panama to secede from Columbia. By do so
this the United States secured the right to over the project that had been
abandoned by the French. In a treaty
that was negotiated between the American and the French canal investors the
United States were granted sovereign in perpetuity of a ten mile strip of land
they called the Canal Zones. Panamanians were not included in the negotiations
and or the signing of the treaty. In
1978 relations between the United States and Panama reached a high point.
President Jimmy Carter and Omar Torrijos negotiate treaties that abolished the
1903 treaty establishing a new relationship between the two countries. The
Panama Canal Treaty required the United States to vacate its military bases,
withdraw its troops by the year 2000, and full control of the canal.
More than a million ships have benefited from the Panama
Canal route by reducing costs and time. The canal is known as one of the most important
trade routes in the world. The canal has transformed international trade. The
international shipping industry carries 90% of world trade; it is the driving
force of the global economy. Approximately, there are over 60,000 merchant
ships trading internationally transporting every kind of cargo. Without
shipping intercontinental trade the bulk transport of raw materials and import
and export of affordable food and manufacture goods would not be possible. As
world trade grows, the international shipping industry has responded to the
demand for its services. Annual freight rates of has totaled to more than 400
billion dollars which represents 5% of the total global economy.
Sea transport is one of the safest, cleanest, and efficient
mode in the industry. Continuous
improvements in technology and efficiency have made the cost of moving goods by
sea highly competitive. Two-thirds if world shipping is associated with the energy
and metal industry; the health of the shipping industry is heavily dependent on
them. Shipping markets are volatile and one of the main task of the ship owners
is to manage these financial risk. In recent years, the world has seen a major
shift towards industrial production in Asia this has resulted in the demand for
shipping goods by sea.
With the rise of E-commerce, it fundamentally
shaped the shipping business resulting in an increase of shipping goods
globally. International sales have increased over 250 billion dollars. It has
been predicted by 2028 global trade will increase five times more in Europe,
Asia, and the United States.
The Panama Canal expansion has impacted logistics strategies
The expansion of the Panama Canal consist of the
construction of two new set of locks. The deepening and widening of the
existing channels and the excavation of new navigation access channel
connecting the new set of locks on the Pacific side and Culebra cut. The Panama Canal expansion expanded its
capabilities by maximizing the capacity of ship’s Twenty-Foot Equivalent Unit
(TEU) that can through the canal. This
expansion resulted in larger ships can reduce five days from Asia to America as
opposed to going around South America. Transportation Managers should evaluate
whether bringing goods or the West or East coast would be cost and time
efficient for their customer base.
The expansion have impacted shipping companies and 3PL
offering an alternate routing, more shipping options, and cost effective
solutions. In the United States the
expansion had made it easier for shippers to import and export goods from West
Coast and East Coast ports. Currently, West Coast ports receive two-thirds of
containers from Asia.
The analysis focused on whether or not the expansion of the
Panama Canal effected global shipping. Trade between Asia, U.S., and Latin
America was not affected by the expansion of the canal. The results concluded that shipping was
increased by the countries’ economic growth. Trade with China will continue to
be strong because it remains the number one exporter.
The expansion has to
elements: the ability to put bigger ships through and foreign trade.