The Panama Canal refers to an international waterway connecting the Pacific Ocean with the Atlantic Ocean. The United States started building the Panama Canal in the early eighteenth century and completed it within a decade. Building of the canal was extremely significant because it ensures that the ships and other water vessels travel the shortest distance between the Pacific Ocean and Atlantic Ocean (Bussolo, De Hoyos, & Medvedev, 2012). Expansion of the Panama Canal has been extremely necessary to allow many large vessels to pass through. In addition, the expansion will reduce the traffic jams that may delay the movement of ships to their destinations (Schexnayder, 2013). The Panama Canal has been significant in enhancing the world commercial and economic developments due to the unique location. The canal has provided high quality transport service to about 815,000 vessels since 1914. Several studies show that the expansion of the Panama Canal will increase employment opportunities among the Panamanians (Bussolo, De Hoyos, & Medvedev, 2012). This paper will consider effects of the Panama Canal on the global economy, expansion of the Panama Canal and its effects, effects on the global transportation networks, and effects of the canal on trade.
Effects of the Panama Canal on the Global Economy
Research has shown that the Panama Canal has contributed to the improvement of the United States economy due to various reasons. Many imports and exports move through the Panama Canal on a daily basis. Exporting of products creates employment to the United States citizens who make the products. On the other hand, the United States citizens acquire products from other continents, including Asia, cheaply due to low transportation costs (Watkins & Moser, 2006). The flow of products through the canal improves the global economies, including the economy of the United States. Disruption in the movement of products through the canal will hinder the development of global economies due to the increase in the export and import costs. Therefore, the Panama Canal is indirectly and directly significant to the development of the global economy due to a reduction in the transportation costs (Bussolo, De Hoyos, & Medvedev, 2012). However, the narrowness of the Panama Canal leads to traffic jams, especially when the number of shipping vessels increases. In addition, the narrowness of the Panama Canal may not allow large shipping vessels to pass through the canal. Therefore, expansion of the Panama Canal has been necessary to avoid traffic jams, as well as promote the movement of large shipping vessels that carry large quantities of cargo.
Expansion of the Panama Canal and its Effects
The Panama Canal has provided a significant link in global trade by accommodating about five percent of the globe’s total volume of cargo. Expansion of the Panama Canal will increase the total volume of cargo and enhance the passage of large vessels, thereby altering international trade flows (Schexnayder, 2013). Large container vessels will reduce the trans-ocean shipping cost, especially for the trade routes that provide East-West services (Watkins & Moser, 2006). The expansion of the canal will alter the demands on the transportation networks, operations, and services. The United States exports bulk and containerized cargoes, especially agricultural products to Asia through the Gulf Coast ports. Using large vessels will provide a cost-effective transportation service that will enable the United States to compete in the global market for agricultural commodities and energy (Bussolo, De Hoyos, & Medvedev, 2012).
The Panama Canal Authority (ACP) began expanding the Panama Canal in 2007 with the aim of altering the global trade patterns, as well as opening the waterway to other world markets. Expansion of the Panama Canal will double the capacity of the canal by 2014 thereby allow for the movement of large and wide vessels. Large shipping vessels will only pass through the Panama Canal when it is wide and deep. Therefore, the expansion of the Panama Canal will maintain its competitiveness and promote the Panama route’s value. Studies show that the people of Panama considered the expansion project of the Panama Canal an economic engine that will continue offering numerous opportunities to many generations (Ciprian, 2009).
The ports that can handle large shipping vessels will benefit most due to the availability of large volumes of cargo at the destination (Bussolo, De Hoyos, & Medvedev, 2012). Availability of large cargo will promote job opportunities, which include handling and distribution of cargo. Therefore, the people of Panama will benefit from the Panama Canal economically due to the availability of job opportunities locally (Zumoff, 2013). The expansion of the Panama Canal has also promoted business opportunities as businessmen and businesswomen obtain commodities at low prices, thereby make profits (Watkins & Moser, 2006).
Effects on the Global Transportation Networks
The aim of expanding the Panama Canal is to enhance the global trade by allowing large shipping vessels to call at the United States Ports. Large channels and locks will allow many shipping vessels to pass through the Panama Canal every day. The transport networks include railroads, inland waterways, and interstate highways. The Panama Canal has led to the expansion of global transport networks to facilitate transportation of commodities from the countries of origin to the world markets (Bussolo, De Hoyos, & Medvedev, 2012). Research has shown that the movement of products through the Panama Canal takes a short time because the route is short. Expansion of railroads, inland waterways, and interstate highways has been necessary to avoid the accumulation of products at the ports as countries import and export products.
Countries have specialized in industries as they can access many markets due to the presence of efficient transportation networks. The international cargo flows has shaped the global transport network with the aim of reducing the cost of products. The United States transportation network constitutes port facilities, coastal and inland waterways, freight railroads, and the national highway system. It is evident that the Panama Canal makes the transportation network through which commodities move (Bussolo, De Hoyos, & Medvedev, 2012). The movement of products, such as grains, from farmers to the Asian markets will not be easy without the use of the Panama Canal, which provides the shortest and cheapest route. Therefore, the Panama Canal has contributed to efficient and cost effective transportation of commodities between countries. The economy of America and Asia has improved significantly because of the efficient and cost effective transportation networks (Bussolo, De Hoyos, & Medvedev, 2012).
Effects of the Panama Canal on Trade
Research shows that the expansion of the Panama Canal will be significant in promoting the United States Trade (Schexnayder, 2013). The trade will be open between the East Coast of South America and the West Coast of the United States. Many market segments will experience the impact of the Panama Canal expansion. For instance, grain is among the United States’ most significant commodities that go through the Panama Canal. Therefore, expansion of the canal will help in facilitating the transportation of grains that originate in the United States (Bussolo, De Hoyos, & Medvedev, 2012). Research shows that the United States exports about 40 metric tons of sorghum, soybeans, and corn to Asian markets through the Panama Canal.
Currently, the ACP is assessing the movements of soybeans from South America to Asian Markets. Large quantities of soybeans that originate in northern parts of Brazil move to Asia through the Panama Canal. Other commodities that originate in South America include iron ore and coal. Iron ore and coal originate in Venezuela and Colombia and move to Asian markets through the Panama Canal. Expansion of the canal will lead to an increase in coal exports to China by millions of tons because large shipping vessels will move through the canal. The shipment of iron ore takes place from Northern Brazil and Venezuela to Asia through the Panama Canal. It is evident that the shipment of both coal and iron from South America to Asia will benefit when the Panama Canal becomes wide and deep (Bussolo, De Hoyos, & Medvedev, 2012).
In conclusion, the Panama Canal has been a significant waterway that facilitates the transportation of cargo between the Pacific Ocean and the Atlantic Ocean. The canal has provided the shortest transportation route thereby cutting down the transportation costs. The United States and South America have benefited from the Panama Canal because the canal allows them to export their commodities to Asia. Transportation of grains, coal, petroleum products, and iron ore to Asia has been cheap since the shipment takes place through the Panama Canal. Importation of products, such as machinery, clothes, and other products from Japan and China has also been efficient and cost effective. Expansion of the Panama Canal will further reduce the cost of transportation due to the shipment of products as large cargo volumes. A wide canal will allow the large shipping vessels without a traffic jam. Large cargo volumes create employment due to the need to handle and distribute various products. Therefore, the Panama Canal has improved the economy of America due to the creation of employment, as well as reduction of transportation costs.