President Barack Obama appeared in New Orleans on Friday to deliver a speech on the economy, and to urge Louisiana to expand Medicaid coverage. While national media focused on the Commander in Chief’s healthcare plan, the backdrop against which he spoke—the Port of New Orleans—is equally as important.
As a future beneficiary of the Panama Canal expansion, due for completion in 2015, the port represents the economic promise New Orleans and others in the U.S. are banking on.
In the race to establish competitive infrastructure matching the expansion, however, it is becoming clear not every player stands to win from the initiative that is helping drive job growth and strengthening the economy through exports.
“One of the things we should be focused on is helping more businesses sell more products to the rest of the world, and the only way those products get out is through facilities like this,” Obama said. “Right now, exports are one of the brightest spots in our economy.”
While 330 million tons of freight move through the canal each year, capacity constraints are preventing the world’s largest ships from fitting through certain locks. The project to double the canal’s capacity as it approaches its centennial will create a new lane of traffic allowing larger ships, and more of them, to pass through.
This includes constructing two new locks, which raise and lower passing boats and limit the maximum size of ships passing through the canal. These size limits for ships in the canal are known in the industry as Panamax or New Panamax.
Port cities like Charleston, S.C.; Savannah, Ga.; Miami, Fla.; and New York City are racing against time to implement ambitious projects that will both accommodate the expansion and make them more attractive transit destinations.
With so many ports scrambling for a piece of the pie, the extent to which each can profit is uncertain. “Everybody is trying to go after it — there are going to be few beneficiaries, in my judgment,” said William D. Ankner, a former official of the Port Authority of New York and New Jersey and a former secretary of transportation for Louisiana in The New York Times.
The Port of New Orleans, for one, is attempting to gain an edge through deepening the Mississippi River to a 50-foot-depth. This project, which carries a $300 million price tag and requires $90 million each year in maintenance, has yet to receive the necessary federal funding, but it would “match the Panama Canal and allow larger vessels to the port.”
New Orleans’ plan would allow its port to compete directly with Baltimore, Md. and Norfolk, Va., the only two East Coast ports that can handle the super-sized, post-Panamax ships. Currently, it’s the West Coast’s game. “If you’re not at 53 feet, or at least 50 or more, then you’re going to be really challenged in staying competitive in the port industry,” said Kraig Jondle, the director of business and trade development at the Port of Los Angeles.
But while West Coast ports have a clear advantage when it comes to depth, they actually stand to lose cargo when the canal’s expansion is completed and larger ships can bypass California. The Los Angeles and Long Beach Ports, for example, could lose “as many as 100,000 jobs,” pushing them to partner with neighboring towns and railroads to launch improvement projects, including an initiative to “speed the loading of cargo onto trains.”
Other ports are more confident about the immediate impact of the Panama Canal expansion. The state of Florida, for example is expected to add more than 30,000 new jobs as a direct result of increased activity in Miami. According to a recent study, for every dollar spent, the Port of New Orleans’ Mississippi River dredging project would “create $89.4 in benefits.”
The Panama Canal expansion means big things for U.S. exports, but it also means American ports are racing against time to finance and construct multimillion-dollar projects to increase their competitive edge in 2015. It is not clear yet who will come out on top, and the unfortunate reality is that the expansion will not uniformly benefit all players.