CHOKE POINT: Panama Canal third lane will change dynamics of world trade
The impact of the Panama Canal's new third lane, set to open in 2014, will ripple around the world, from shipyards in South Korea to highways in Texas to coalfields in Colombia and soy plantations in Brazil's northeast.
PANAMA CITY, Panama — The nature of global trade is about to change.
The Panama Canal will soon have a third lane that can accommodate [handle] megaships nearly three times larger than any vessel that has ever transited [crossed] the isthmus.
It might not seem like earthshaking news. But the impact will ripple around the world, from shipyards in South Korea to highways in Texas to coalfields in Colombia and soy plantations in Brazil's northeast. Nations will see trade patterns shift.
Ports up and down the U.S. East Coast are in a frenzied race to get ready for the larger, slower, more efficient ships that will ply [sail] the oceans.
They are dredging [clearing] harbors, expanding rail lines, taking a look at port facilities and distribution centers and, in the case of the New York City area, preparing to elevate the roadway on the Bayonne Bridge so that bigger vessels can slip underneath to Newark Harbor.
"It's been said that it's a game changer. Yes, it is," said Alberto Aleman, a Texas A&M-educated engineer who has been administrator of the canal for 16 years during which the United States handed off control to Panamanian hands.
West Coast ports also may feel the impact. About 70 percent of the cargo unloaded at the Port of Seattle is transported by rail to the Midwest and beyond, and some of that Asian cargo could be diverted to the expanded canal.
But Port of Seattle spokeswoman Charla Skaggs said it's not known how much the expansion will affect the Port. She said costs are one of the most important factors to shippers, and those — including fees to cross the canal and the difference in fuel costs — are still to be determined.
Ships are already sailing that are too large for even the expanded canal. Coming from Asia, those so-called "Super Post Panamax" vessels would have to dock along the West Coast.
Why Is the Panama Canal Important to the U.S. Economy?:
The Panama Canal connects the Atlantic Ocean to the Pacific Ocean, via the Caribbean Ocean. This is more complicated than just digging a long trench across the shortest point, the Isthmus of Panama. First, the sea level of the Caribbean is eight inches lower than the Pacific. Second, the different tides between the two oceans must be accounted for. Third, the Isthmus at Panama itself rises 26 meters above sea level.
To solve these problems, ships go through a series of three locks, which lift them up to Gatun Lake, and then lower them through three more locks back down to sea level. It takes, on average, 13 hours to move through the Canal's 51 mile length. Shipping through the Canal is still more cost effective than the alternative, which is shipping around the southern tip of South America. Therefore, the Panama Canal keeps the cost of imported goods down, helping to reduce inflation [a rise in prices].
What Is the Panama Canal Expansion?:
The expansion of the Panama Canal will be complete by 2014. A new third lane will double the canal's capacity. It will accommodate [handle] Post-Panamax ships, which are 1,200 feet in length and carry three times the cargo of 965-feet-long Panamax ships.(Source: USA Today "Super-size container ships require larger locks," August 5, 2009)
Five ports carry 70% of U.S. ship imports: Los Angeles/Long Beach (LA/LB), New York/New Jersey (NY/NJ), Seattle/Tacoma, Savannah, and Oakland. All of these, and the port of Charleston, either already can or will be able to receive Post-Panamax ships by 2014.
FREE TRADE NETWORK: NAFTA
What Is NAFTA?
NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada, the U.S. and Mexico making it the world’s largest free trade area (in terms of GrossDomestic Product - GDP). NAFTA was launched around 20 years ago to reduce trading costs, increase business investment, and help North America be more competitive in the global marketplace.
As of January 1, 2008, all tariffs [taxes] between the three countries were eliminated. Between 1993-2009, trade tripled from $297 billion to $1.6 trillion. (Source: USTR, NAFTA)
When Was NAFTA Started?
NAFTA was signed by President George H.W. Bush, Mexican President Salinas, and Canadian Prime Minister Brian Mulroney in 1992. For the USA, It was signed into law by President Bill Clinton on December 8, 1993 and entered force January 1, 1994. Although it was signed by President Bush, it was a priority of President Clinton's, and its passage is considered one of his first successes.
Why Was NAFTA Formed?
Article 102 of the NAFTA agreement outlines its purpose:
- Grant the signersMost Favored Nation status.
- Eliminate barriers to trade and facilitate [make easy] the cross-border movement of goods and services.
- Promote conditions of fair competition.
- Increase investment opportunities.
- Provide protection and enforcement of intellectual property rights.
- Create procedures for the resolution [settlement] of trade disputes.
- Establish a framework for further trilateral [3 way], regional and multilateral [many-way] cooperation to expand NAFTA's benefits.
CRITICISM
When the North American Free Trade Agreement was first signed in 1994, proponents [supporters] said it would eventually [one day] create jobs for the U.S. economy.
17 years later, a new report estimates, the American worker only has hundreds of thousands of job losses to show for it.
According to a report by Economic Policy Institute economist Robert Scott, entitled "Heading South: U.S.-Mexico trade and job displacement after NAFTA," an estimated 682,900 U.S. jobs have been "lost or displaced" because of the agreement and the resulting trade deficit [less coming in than going out].
NAFTA – North American FREE TRADE AREA
MERCOSUR –South America
FREE TRADE NETWORK: MERCOSUR
Mercosur, the "Common Market of the South," is an economic and political agreement among Argentina, Brazil, Paraguay (which is currently suspended), Venezuela, and Uruguay to promote the free movement of goods, services and people among member states. Mercosur's primary interest has been eliminatingobstacles [blocks] to regional trade, such as high tariffs [taxes] and income inequalities[rich vs poor].
What is Mercosur?
The Mercosur trade bloc's purpose, as stated in the 1991 Treaty of Asunción, is to allow for free trade between member states, with the ultimate goal of full South American economic integration [unity]. The trade bloc's "grand aspiration [dream] is to unify the Southern Cone and then all of South America in an economic bloc," says Katherine Hancy Wheeler, a research associate with the Council on Hemispheric Affairs. "It gives them more trading security." Brazil is the region's largest economy with a gross domestic product (GDP) of more than $2.2 trillion in 2012.
The population of Mercosur's full membership totaled more than 260 million people in 2011; including Venezuela, it has a collective GDP of $2.9 trillion and is the world's fourth-largest trading bloc after the European Union (EU), North American Free Trade Agreement (NAFTA), and the Association of South East Asian Nations (ASEAN). Whether any reduction in poverty can be linked directly to Mercosur trade policies is unclear.
What are associate members?
Mercosur has five associate [friendly] members--Chile, Bolivia, Colombia, Ecuador, and Peru--that do not enjoy full voting rights or complete access to the markets of Mercosur's full members. They receive tariff[tax] reductions, but are not required to impose [make] the common external [outside] tariff that applies to full Mercosur members. Of these countries, Bolivia is being considered for full membership. But the decision is complicated by Mercosur's history with Bolivia, as well as the common external tariff. Bolivian President Evo Morales has criticized Mercosur, saying, "What I've discovered is that the groups such as Mercosur are tools that only benefit businessmen and wealthy people, instead of the poor people" (People's Daily).
CHOKE POINT: Egypt sees revenue in Suez Canal corridor project
By Patrick Werr CAIRO | Wed Oct 10, 2012 10:08am EDT
- Straddling one of the world's great sea routes, the Suez Canal corridor is set to become a bridge connecting Africa with Asia if a grand plan by Egypt's new government comes to fruition [reality].
President Mohamed Mursi's administration is reviving and expanding a series of projects initiated in the late 1990s under former President Hosni Mubarak to turn the banks of the Suez Canal into a world trading and industrial center, hoping it will earn billions of dollars and address [fix] a growing unemployment crisis.
The plan aims to transform the corridor along the 100-mile length of the canal from an area of mostly flat, empty desert into a major world economic zone.
The waterway, the main thoroughfare for the transport of cargo between Asia and Europe, is a vital source of revenue for Egypt. But Egyptian planners believe a lack of vision and poor administration have prevented the country from maximizing [getting the most from] its location at the crossroads of two continents, something they wish to address by expanding transit facilities and slashing red tape [difficult rules and steps] for investors.
Goods worth $1.6 trillion a year pass through the canal, or 10 percent of the world's total shipped goods, said Ashraf Dowidar, a consultant [expert] who has been studying the project. "We're only getting $5.4 billion of this, through the tolls of the ships going through."
"Ships don't want to stop to do anything here. So this is the lost opportunity we have. If they can make them stop, at least do maintenance, do repair - a logistics [movement plan] area - then the whole thing will move," said Dowidar, who until recently worked for the Ministry of Trade and Industry.
The canal zone was heavily bombed during Egypt's wars with Israel. Suez, at the canal's southern end, is now a depressed [poor] industrial town that saw some of the most violent protests during the uprising [rebellion] that ousted [kicked out] Mubarak in February 2011.
"We dream that the whole of Egypt might become a logistics centre and I think the ministers have this vision," planners have said.
The government is also putting the final touches to the first highway connecting the country with Sudan and another highway across the Nile Delta that connects Port Said with Alexandria and beyond to Libya.
The canal, which opened in 1869 to great fanfare and which has twice been closed since World War II due to war between Egypt and Israel, is operated by the Egyptian government through the Suez Canal Authority.
Between the two complexes, near the city of Ismailia half-way down the canal, the government is working on yet another zone, called Technology Valley, to attract high-tech industries and a university.
Projects underway or planned include a second vehicle tunnel under the canal, the dredging [clearing] of a new channel at the canal's north entrance and the expansion and completion of roll-on, roll-off, multiple-use and bulk liquid terminals, and bunkering [storage] facilities.
The industrial zones are also being expanded. A high-speed train to connect Port Said and Suez with Cairo is also on the drawing board.
CHOKEPOINT:
The Strait of Malaccalinking the Indian and Pacific Oceans, is the shortest sea route between the Middle East and growing Asian markets.
The Strait of Malacca, located between Indonesia, Malaysia, and Singapore, links the Indian Ocean to the South China Sea and Pacific Ocean. Malacca is the shortest sea route between Persian Gulf suppliers and the Asian markets—notably China, Japan, South Korea, and the Pacific Rim. Oil shipments through the Strait of Malacca supply China and Indonesia, two of the world's fastest growing economies. It is the key chokepoint in Asia with an estimated 15.2 million barrels/day flow in 2011.
How to Defeat Pirates: Success in the Strait
By MICHAEL SCHUMAN
For centuries, the Strait of Malacca has been one of the great thoroughfares of global commerce. In the old days of wood and sail, the 500-mile ribbon of water, which connects the Indian and Pacific oceans between Malaysia and the Indonesian island of Sumatra, carried pricey spices from the islands of the Indies to the eager markets of the West. Today, about 40% of the world's trade passes through the strait on 50,000 vessels that ply [move thru] its waters every year. Oil from the Persian Gulf flows east to China and Asia's other voracious economies, which in turn send back manufactured goods to the Middle East and Suez Canal.
With such juicy pickings, it's no wonder that the strait has long been a popular hunting ground for pirates. The sheer quantity of ships passing through its confined space — at one point the strait narrows to a mere 1.7 miles — makes spotting potential targets easy for pirates, and its route is a Hollywood-ready seascape of tropical isles and secret coves, providing ample[plenty] hideaways. Earlier this decade, the waterway's piracy problem reached crisis [danger] levels.
Attacks ranged from small-scale robberies by lightly armed desperados to highly organized hijackings of giant vessels by teams of professionals. According to the International Maritime Bureau [office] of the International Chamber of Commerce, the Strait of Malacca suffered 38 actual or attempted pirate attacks in 2004, the second highest total in the world after Indonesia. "We don't stand a chance" against the pirates, an Indonesian naval officer conceded [revealed] at the time. In 2005, the London insurance market added the strait to its list of areas at risk of war.
But today, it's the pirates who are on the run. While piracy in Africa has become a major international security concern, the problem in the strait has been almost completely eradicated. Only two attacks were attempted there in 2008, even as the global total reached a record high. In the first quarter of 2009, the bureau reported that the number of pirate attacks around the world nearly doubled, to 102 incidents, compared with the same period last year; only one of them occurred in the Strait of Malacca.
CHOKEPOINT: Strait of Hormuz
The Strait of Hormuz is by far the world's most important chokepoint with an oil flow of about 17 million barrels per day in 2011. Located between Oman and Iran, the Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. At its narrowest point, the Strait is 21 miles wide, but the width of the shipping lane in either direction is only two miles, separated by a two-mile buffer zone [protection space]. The Strait is deep and wide enough to handle the world's largest crude oil tankers.
How does this cartoon show the geographic importance of the Strait of Hormuz?
Iran Plotting to Spill Oil in Strait of Hormuz, Magazine Claims
Published: Tuesday, 16 Oct 2012 CNBC.COM
Iran is secretly planning to spill oil into the Strait of Hormuz as revenge for Western sanctions [trade cut off], according to Der Spiegel.
The German news weekly claims to have spoken to Western intelligence [spy] sources who say they have obtained Iran's classified [secret] report on the operation, which has the potential to create an environmental disaster.
Code-named "Murky Water," the plan allegedly [is rumored] involves steering an Iranian supertanker, capable of carrying hundreds of thousands of barrels of oil, onto a rock.
Iran has previously threatened to close off the Strait of Hormuz, through which almost a fifth of the world's sea-traded oil travels.
That prompted the U.S. to boost its military presence in the Persian Gulf, sending helicopters, underwater drones [robots], and mine-sweeping ships to deter Iran from trying the tactic.
What nation do the boats represent?What do you notice about the alligator teeth on the Iranian side of the Gulf?
FREE TRADE NETWORK: European Union (EU)
The European Union (EU) is an economic and political union of 27 member states which are located primarily [mainly] in Europe.
The EU has developed a single market through a system of laws which apply in all member states, including the abolition [removal] of passport controls [freedom to travel]within the EU.
This ensures the free movement of people, goods, services, and capital, enacts legislation in justice and home affairs, and maintains common policies on trade, agriculture[farming], fisheries and regional development. A monetary union, the eurozone, was established in 1999 and is currently composed of seventeen member states.