Known project continue through Panama. Anxious to begin

Known as one of the greatest
architectural achievements of the twentieth century, the Panama Canal offers
the opportunity for vessels to reduce their voyage by thousands of miles,
making global shipping even more prominent than it had been in the past. The
48-mile-long waterway that connects the Pacific and Atlantic Ocean was built to
shorten the journey of ships around the tip of South America. Ferdinand de Lesseps was a French diplomat who was behind the
construction of the Suez Canal in Egypt starting in 1859. In 1880, he began the
excavation of the Isthmus of Panama with hopes of creating a canal similar to the
Suez. The goal of this new canal was to create a more direct route that would
increase trade, and bring economic success to the industry. After 9 years of
hard labor and tropical diseases, the French went bankrupt, and ceased all
construction of the canal. The French had taken a beating during the 9 years of
construction, resulting in the death of 22,000 hard laborers (Reid 1). Once de
Lesseps had left, American interest reached and all time high, as they made a
push towards finishing what the French had started.

            In 1901,
the United States and the United Kingdom signed the Hay-Pauncefote Treaty,
which revoked any past agreements or treaties that they had signed regarding
the construction of a canal in Central America. The Hay-Pauncefote Treaty gave
the United States the rights and license to build and control their own canal
which after much deliberation, the United States Senate voted on having this
project continue through Panama. Anxious to begin construction, Secretary of
State John Hay proposed a treaty with the Colombian Prime Minister, Tomas
Herran. After discussing with the Colombian congress, Herran gave Hay notice
that the financial terms were not what the Columbian government was looking
for, and refused to accept. With that, President Theodore Roosevelt responded
with the dispatching of large U.S. Navy destroyers on both sides of Panama, in
support of Panama, and their fight for independence (Office of the Historian 1).

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Colombia’s military was unable to retaliate, which resulted in Panama declaring
their independence from Columbia, on November 3, 1903 (Office of the Historian
2). Immediately after gaining their independence, Panama made French engineer
Philippe Bunau-Varilla in charge of rewriting the Hay- Pauncefote Treaty, so
that the United States could begin construction immediately (Editors
Encyclopedia 1). Bunau-Varilla was also named Prime Minister to the United
States as well, which put him at the head of the project. When it came to the
financial aspects of the canal, the United States bought the land for one-time $10 million payment to Panama, and an annual
annuity of $250,000 (Office of the Historian 3).

            The first year of construction was
noted as being similar to that of the French’s utter failure in the creation of
the canal. Chief engineer John Wallace, failed in creating any sort of plan in
which would accommodate those working on the canal. By the end of the year,
Wallace and two other American engineers booked their tickets back to America
in utter failure. So far, the United States had poured $128 million worth into
the one-year effort, which ended with little to no progress (PBS 1). 

            With the resignation of Wallace, his
new replacement had a large amount of work to do. John Stevens, who was
credited with the construction of the Great North Railway, took control of the
utter catastrophe that was going on in Panama (PBS 2). Stevens and his group of
engineers made making the Panama Canal a safe place to work their priority. Stevens
had workers drain swamps, pave new roads, and install pluming in efforts to
reduce the amount of mosquitos in the area. The “lake and lock” design that
Stevens used was highly favored by President Roosevelt, and a remake of the
design that de Lesseps used.

            After Stevens resigned in 1907,
Colonel George Washington Goethals picked up right where he had left off. Under
Goethals command, there was an increase in deaths and loss in equipment.

Goethals was known for not putting up with any sort of distractions that could
put the construction of the Canal in jeopardy. For instance, when Goethals
arrived many workers were on strike as a result of poor pay as well as lack of
facilities. Goethals came in and ended their strike, while fulfilling their
needs in the months to come by adding several new facilities to improve the
quality of life not only for them, but for their families as well (PBS 3).

            The Panama Canal was officially
opened for business on August 15, 1914, however the world barely noticed. The
outbreak of World War I put a shadow over the canal, and the great
accomplishment that had occurred for the United States was left unnoticed.

 

International Shipping

            Not only is the Panama Canal
important to the Panamanian economy, but it is also considered the center for world trade, transporting
more than 300 million tons of products every year between the Atlantic and the
Pacific oceans (Technology and Operations Management 1). Before the Panama Canal was created,
the excessive route that vessels had to take from Asia to the East Coast of the
United States was almost not worth it. Vessels now do not need to travel all
the way around South America to reach their destination because of this 48-mile
canal. Not only does the Panama Canal save the ship’s journey time, but it also
helps the ship-owner save money. Commercial and even military vessels now have
easy access to both hemispheres of the globe, which affects every country in
regards to trade and overall domination of the world’s economy. 

            The Panama Canal today is witnessing
an absolute outbreak of countries using this short cut between the two largest
oceans on the planet. With more than 14,000 vessels passing through its
convenient location, the Panama Canal provides over 140 trade routes for more
than 80 countries (Sohns 1). The United States is considered the key
beneficiary, with almost two-thirds of goods passing through the canal are
either headed to or from a port in the U.S. (Webster 1). The Panama Canal sees
5% of the worlds goods pass through its gates each year, which is an extremely
interesting fact, considering a large portion of maritime trade is local or
bound by rivers (Webster 2).

            As time progresses, container ships
along with bulk carriers patiently wait their turn to pass through the “lake
and lock” system. Over the past several years, the concept of “bottlenecking”
has become an extreme issue, increasing transit time through the canal by
almost 4 hours (Webster 3). The size of some vessels were too large to pass
through the canal, forcing them to find other means of transportation to get
their goods to the destination. As a result, in 2006 the Panama Canal Expansion
Project was proposed creating a third lane, which would allow larger more
modern ships availability to come through the canal, along with decreasing the
congestion within the canal.

The expansion of the canal was said to increase global
shipping, as it would open the door to accommodate new, mega ships which have
the capability to carry upwards of 15,000 TEU’s (Maritime Connector 1). With
the completion date set to 2014, the $6 billion project was underway. After
18-months of delays, the expansion was completed in 2016, and is now flowing
smoother, with Neo-Panamax ships passing through.

            But how will the expansion of the
canal affect international shipping?  The
Panama Canal expansion has offered the creation of jobs within the industry,
positively affecting global commerce, and increasing competition. Before the
expansion, there were limitations to the size of vessels that were allowed in
the canal. Now that the canal has opened the third lane, there has been an
influx of orders for Neo-Panamax vessels. With the increase of volume these
ships can carry, there will be an increase in the restructuring of different
aspects within the industry, mostly dealing with ports and equipment. However,
it will also result in the call for the increase of workers in warehouses, as
well as different supply chain management.

            Another affect that the expansion
will provide the maritime industry is the reduction of shipping costs by $8
billion a year (Bonney 1). With 5% of maritime trade passing through the canal,
the money made by the canal is responsible for 40% of Panama’s GDP (Bonney 2). There
have been many different predictions on how the Panama Canal will affect this
Central American country, but the Panama Canal Authority predicts that by
“2021, the new expansion project will bring in $2.1 billion per year in
added revenue, representing 2.8% of GDP” (Bonney 3).

 

Intermodal Competition on Freight Corridors

            When it comes to competition with the Panama Canal, there
are few that stand a chance. The largest threat being the United States
Intermodal Transportation system, more specifically the route from Asia to U.S.

West Coast ports, ending on the U.S. East Coast. The three individual modes
that make up this complex yet effective system are intercontinental shipping,
rail, and road transport (Leach 1). Within this intermodal system, goods from
Asia are sent to any port on the West Coast, and then are transferred by a
certain mode until it reaches its destination on the East Coast. With some
stops along the way, the intermodal system from Asia to the East Coast is 18.3
days (Leach 2), which may vary, depending on what mode of transport is used. On
the other hand, a more reliant and less costly route through the Panama Canal
takes a total of 21.6 days (Leach 3).

            Looking at the new lane in the Panama Canal, it seems as
though the U.S. Intermodal Transportation System of goods may be at a
disadvantage. With numerous strikes going on, as well as different issues with
road congestion, the Panama Canal will prove to be consistently reliable. A
single Neo-Panamax container ship has the capacity to hold 13,000 TEUs of goods
(Maritime Connector 2). If one of these Neo-Panamax vessels were to unload in let’s
say the Port of L.A./ Long Beach, it would take several trains or trucks to
transport those containers to their destination on the East Coast. On the other
hand, if that Neo-Panamax container ship would go straight through the Panama
Canal, the time spent loading, transporting and unloading the goods at the
final destination point would reduce, as well as the cost of transportation. With
the expansion of the Panama Canal, importers on the East Coast should begin to
have Neo-Panamax vessels deliver their goods through the canal, because of its efficiency,
as well as factors that tie in to the overall cost.  

            Another aspect of the competition within the U.S.

Intermodal Transportation System is the transportation of the goods after they
arrive in their port of destination. Whether the mode of transportation be
rail, road or a form of intercontinental shipping, all depends on where the
location of the port, and what type of cargo is being transported around the
country. For instance, if a container ship arrives in the Port of Newark, there
needs to be a train at the port on arrival, in which a crane can unload these
containers on to the train platform itself. This method is referred to as containers
on flatcar (COFC), where the vessel’s containers are offloaded on to the train
car, and then shipped to its destination whether that be a warehouse or another
storage facility.