By Guest Columnist STEVE WILLIS, vice chair of the Sierra Club Georgia Chapter
Panama Canal Authority CEO Alberto Aleman Zubieta’s recent East Coast harbor deepening promotional tour raises more questions than answers.
While Aleman Zubieta scrupulously avoided openly advocating for the deepening of any one U.S. port in preference to another, on this recent tour he unequivocally pitched deepening as many East Coast ports as possible, as soon as possible.
Only a year ago the CEO argued that three deepened ports on the U.S. East Coast, including the Gulf States, could accommodate the huge “Post-Panamax” ships that will be passing through the canal after its deepening is completed in 2014.
Since the single megaport complex of Los Angeles/Long Beach (LA/LB) now handles about 40 percent of all U.S. containerized shipping, Zubieta’s earlier prediction sounded quite reasonable.
Why his about face?
As it turns out, the CEO has plenty of reason to flip-flop. The canal expansion project is projected to cost between $15 billion and $25 billion, which seemed like a no-brainer when authorized during the economic good times of 2006, but has now been overtaken by events.
The success and profitability of the deepening now seems in question, and Zubieta is doing what he can drum up business and, perhaps, to redirect the blame for a possible Canal opening fizzle from himself to Yankee tardiness in the deep dredging department.
John Martin, respected maritime economics analyst, reports that shippers have already redirected virtually all container shipments which can benefit from movement through Panama to the U.S. East Coast using ships which meet the Canal’s present limitations.
When the deepened Canal locks open in 2014, Martin expects no significant increase in Canal transit. Larger ships may actually reduce the number of canal passages made, and thus reduce the tolls received by the Panama Canal Authority.
Of course, The Authority can raise the tolls for the bigger ships proportionately, but this would induce shippers to stick with US West Coast ports, or switch to the cheaper tolls of the Suez Canal.
Numerous other trends are running against Zubieta’s interests.
• Many of the latest megaships being built are too big to pass through the Panama Canal even after its expansion (but they can easily pass through the Suez Canal).
• America’s largest port complex, LA/LB has greatly improved its rail services to the Midwest and Northeast and even after the Panama Canal deepening access to the Midwest and Northeast via LA/LB will still be considerably faster than the Panama Canal route.
• The worldwide economic doldrums are pinching maritime services profits, putting some companies out of business, and producing a glut of unneeded ships.
Certainly Zubieta is desperate to maximize incentives to lure more container traffic to the US East Coast through Panama. One big incentive would be to build widespread port overcapacity in the U.S. East funded at tax-payer expense. This would result in fire-sale competition among all East Coast Ports, as well as cut-throat price wars between the East Coast Ports and LA/LB.
The wasteful development of port overcapacity generated by irresponsible use of tax revenues would ultimately produce rock bottom pricing for East Coast port services benefiting marine shippers and box store corporations. It would also condemn tax payers to interminable demands from federal and state governments to cover port losses.
Whatever happens, Zubieta will remain a rich man. The American taxpayer and the American economy are at far greater risk.
Taxpayers may end up footing the bill for the building, maintenance and permanent life-support for unneeded port facilities. And the U.S. economy may be handicapped for the rest of this century by a ports and goods movement infrastructure which was obsolete even before it was built and which cannot compete with the thoughtfully designed infrastructures of Asia and Europe (as well as the U.S. West Coast’s).
America is likely to deeply regret its foolish interstate rivalries, petty political grasping for port pork, and obliviousness to the overarching requirement to know what you are doing before dumping billions of taxpayer’s dollars into fragmented, wasteful and ill-considered port projects – utterly devoid of any real national plan or strategy.