Someone once said that it’s not leaving port, but coming in, that determines the success of a voyage. While this has some truth to it, the port that one departs from is just as important to a successful endeavor.
It may surprise many that if the planned expansion of the Panama Canal was completed tomorrow, the United States, one of the world’s largest trading powers, would only have six ports deep enough to handle the new larger ships that will pass. Yet, we are competing with all other parts of the world that are updating their ports. Since agriculture goods play a significant role in U.S. trade, modernizing our ports is extremely important for farmers and ranchers to be able to continue to thrive in the world market.
If You Build It, They Will Come
Even more surprising than the U.S. only having six large ports is the fact that all these ports are isolated on the East and West Coasts. That’s right, Gulf Coast ports, including New Orleans, do not currently have the capacity to handle larger ships. If upgrades to U.S. ports are not completed in time, for major trade leaving the U.S. Gulf, smaller boats will need to be utilized to trans-ship our goods to ports like those in the Bahamas and Dominican Republic, where they would offload to larger vessels traveling to Latin America, Asia and other parts of the world. Similarly, goods coming from other countries would potentially have to go through the same routine in the Caribbean, offloading to smaller vessels to enter ports in the U.S. Gulf.
If you are scratching your head, you aren’t the only one. This process of loading and offloading ships costs a lot of money. Inadequate port size also leads to higher transportation costs because vessels may be loaded to less than capacity and more vessels may be required to ship the same amount of commodities.
In the meantime, our competitors around the world fare much better. Because their ports are deep enough, it is easier and less expensive to move products in and out. Further, Europe, Africa, Asia, Latin America and the Caribbean are all undergoing major new port projects or expansion of existing facilities.
Latin America, for example, is rapidly continuing with some of the world’s most sizable port development projects. The region is catching up with other regions through larger port investments, which stand at almost $12 billion. This means China will have access to sell its farm products to Latin America, where Asia never had access before.
For Right of Way, Gross Tonnage Rules
The expansion of the Panama Canal will allow significantly larger ships to move through the waterway. The project, expected to be completed in 2014, should increase cargo volume by an average of 3 percent per year, doubling the 2005 tonnage by 2025.
Currently, the largest ship able to pass through the canal can hold up to 3,500 TEUs (twenty-foot equivalent unit, a measure used for capacity in container transportation). To maximize the canal’s new dimensions, shipbuilders are making larger vessels that are able to hold up to 12,000 TEUs and require 50-51 feet of draft.
These larger ships require deeper and wider shipping channels, greater overhead clearance, and larger cranes and shore infrastructure – all of which make the U.S. Gulf a non-trading player. Some U.S ports can accommodate the larger vessels. However, most cannot, including many ports that are very important to U.S. agricultural exports.
The U.S. exports approximately one-quarter of the grain it produces. In 2011, more than 58 percent of our grain exports departed from the U.S. Gulf. This may significantly change as larger ships carrying grain from our competitors are able to access our trading partners. The Panama Canal could potentially shift world trade as U.S. exporters will be unable to pass on higher transportation costs when customers can purchase similar products from other countries.
As the saying goes, “For Right of Way, Gross Tonnage Rules.” This law, known as the rule of common sense on the water, is also common sense for international trade. In other words, those with the biggest ships and ports to accommodate them will win every time. To maintain our competiveness in the world market, it is essential that the U.S. update and modernize its ports to accommodate larger ships. Without this investment in infrastructure, we will literally miss the boat.