The Panama Canal, China and bacon

Mac McPhail Contributing columnist

August 25, 2013

They are working on expanding the Panama Canal, and apparently it’s a big deal. Over the past few weeks I’ve heard reporters and commentators on TV talk about the expansion of the canal, and its potential impact on shipping and seaports on the United States east coast. Then, a couple of weeks ago, President Obama was on “The Tonight Show with Jay Leno” and he brought up the subject again.

The President said, “The Panama is being widened so that these big supertankers can come in. Now, that will be finished in 2015. If we don’t deepen our ports all along the Gulf — places like Charleston, South Carolina, or Savannah, Georgia, or Jacksonville, Florida — if we don’t do that, those ships are going to go someplace else. And we’ll lose jobs. Businesses won’t locate here.”

President Obama feels that the expansion of the Panama Canal will have an effect on our economy. So, what exactly is going on with the expansion of the Panama Canal, and what effect, if any, could it have on our local economy? Completed in 1914, the Panama Canal was an engineering marvel in its day. Ships were able to go from the Atlantic to the Pacific through the canal without going around the tip of South America. But, over the years the ships have gotten larger and many are now too big for the canal.

A NPR News article by Jason Beaubien states, “The expansion of the canal is one of the largest construction projects in the world right now, a multibillion-dollar effort that will add a third channel to the waterway. The new locks will be bigger than the existing ones, allowing massive cargo ships from China and other parts of Asia easier access to the East Coast of the United States. Work on the expansion began in 2007, and the new channel is scheduled to open in 2014.” (Due to construction delays, it will probably be 2015.)

When completed, the third lane will enable the canal to handle 50% more traffic each day. But more significantly, the canal will be able to handle the larger cargo ships with many more containers on board. The largest ship passing through the Panama Canal can now only hold up to 4,500 20 foot containers. (That’s the standard size cargo container.) When the expansion is completed, larger supercargo ships that can hold three times that amount, up to 13,000 20 foot containers, will be able to pass through the canal.

The prime mover on the Panama Canal expansion is China. Presently, supercargo ships from China have to be docked on the west coast and the goods have to be transported across the country to east cost destinations. This is an added expense. When completed, the Panama Canal expansion will enable those ships to dock directly at ports on the East Coast, nearer to your favorite discount superstore. The last line in the NPR article states this clearly, “The canal expansion opens up more opportunities to move more goods from China to the largest consumer market in the world, the U.S., at a lower cost.”

Have you figured out yet how this may affect you? Well, you will probably be able to get more goods from China at your local discount superstore at lower prices. More goods will be able to be made and sent to the U.S. at competitive prices due to the lower transportation costs. But this means that there will be less goods sold made here in the U.S.

As noted in a previous column, the recently proposed purchase of Smithfield Foods by Chinese meat producer Shuanghui Group for $4.72 billion is seen by analysts as primarily a move to gain access to American technology and know-how in the pork producing business. As the analyst on TV said, “They’re (Shuanghui Group) not after the bacon, they’re after the technology.” And, in the future, if and when they start sending their bacon to the eastern U.S. coast, it will be much more efficient and less costly to transport due to the Panama Canal expansion. This will help them lower the price of their bacon down at your favorite discount superstore. If that cost is less than the price of homegrown pork, what could be the effect on the American pork industry? Specifically, what about right here in Sampson County?

Water flows toward where there is least resistance. Smart business people do, also. As I was finishing this column on Wednesday, I noticed an article in this newspaper reporting on the nuisance law suits filed against hog operations in Sampson and Duplin counties. Murphy-Brown and local pork producers plan to fight it and not settle. But if the resistance and costs become too high, the pork industry can always take their business somewhere else, like China. I doubt those out of state lawyers will find too many plaintiffs over there willing to sue.