Virgin on Business: Dealing with Canal Zones

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By the time people got around to building a serious industrial transportation system in the Pacific Northwest, canal building had largely dried up in the rest of the country. Railroads were faster and better equipped to handle rugged topography, so that’s the way everyone went. The one notable exception was the canal dug to create a navigable waterway between Lake Washington and Puget Sound.

But, internationally, the era of great canal building was just getting started. The Suez project, completed in 1869, was followed by Panama (1914), the Welland (essentially the Niagara Falls bypass, the most recent upgrade done in 1932) and the St. Lawrence Seaway (1959).
In some respects it’s still going. The much-anticipated and oft-delayed Panama Canal Expansion Project is, according to the canal authority, more than 90 percent complete. When finished, it will increase the waterway’s capacity from ships carrying 5,000 TEUs (20-foot equivalent units, a standard measure of containers) to 13,000.

Much more quietly and expeditiously, the Egyptians have completed a 72-kilometer expansion of the Suez Canal. The government says the canal will be able to handle an average of 97 ships a day by 2023, up from the current 49.

A Chinese consortium is backing a canal through Nicaragua as an alternative and competitor to Panama. There’s even been talk about a canal across the Kra Isthmus of Thailand, as a shortcut between the Indian Ocean and the South China Sea and a way to avoid the Strait of Malacca, a clogged and particularly unpleasant maritime neighborhood.

Canals represent one more complication to the already complex competitive landscape for ports in the Puget Sound region. There are trade disputes and pacts to worry about. There are issues of access in getting cargo into and out of the ports via overloaded rail lines and highways. There are labor disputes and taxes to worry about. There are economic trends — is China up, down or sideways these days? — federal taxes and ports from British Columbia to Mexico grabbing for market share to worry about.

And there are canals to worry about. Some of the worries are obvious. A bigger Panama Canal still wouldn’t be big enough to handle the megaships now being built. But it might attract cargo that shippers to markets in Texas, the Midwest and the East might figure is better off being handled in Gulf or East Coast ports. 
Some worries are less apparent. The Suez expansion project, for example, might seem to be more of an issue for Asian-European trade, except that Asian shippers might conclude that it’s easier to get to North American markets through East and Gulf Coast ports than to go in the other direction (and there were cases of that during the West Coast port slowdown). Remember when there was discussion of a North American bridge route in which exports from China would be shipped to the West Coast, put on rail for shipment to the East Coast, then loaded on another ship to be sent to Europe? That logistical system sounds even more Rube Goldbergian now than it did when it was first proposed.

The problem for the regional ports is that they appear bereft of a competitive strategy — even one as outlandish as the bridge route — to deal with the bridge route. For months, attention has been focused on creation of the Northwest Seaport Alliance, a combination of the maritime assets of Tacoma and Seattle. Comparatively little time or attention was devoted to how the alliance would actually address those competitive challenges and weaknesses, many of which were expensively and vividly illustrated by the port slowdown.

They need one, and fast. The rest of the world isn’t waiting around to see if the Puget Sound ports get their strategic acts in gear. The slow boat to China — or from it — is looking for ways to move cargo on water and over land a little faster. If that’s not here, it’ll be somewhere else. 

 

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