The United States’ economic stability depends on the continued development of ocean-going trade and the ports, waterways, and other infrastructure that make global commerce possible. Deep-draft seaports connect the United States to the world and are an engine of economic growth. In 2014, the American Association of Port Authorities (AAPA) reported that the sum of tax revenue generated by ports, wages to port workers, and indirect jobs and revenue produced by importers and exporters showed that U.S. ports had an economic impact of $4.6 trillion, just over a quarter of U.S. GDP. According to the AAPA, 13.3 million Americans work in trade-related jobs. Since 1994, exports of manufactured products are up 43 percent, high technology exports are up 45 percent, consumer goods and industrial supplies exports are up more than 40 percent, and agricultural exports increased 31 percent. The AAPA estimates that by 2020 the total volume of cargo shipped by water is expected to be double that of 2001 volumes.
The Panama Canal Expansion Project, which is scheduled for completion in 2016, will double the capacity of the Panama Canal. The expansion is expected to alter trade routes as bigger cargo ships will be able to cross the Pacific, travel through the Canal, and offload their goods on the East Coast of the United States. This expansion will create a new lane of traffic and allow more and larger ships to transit. New Panamax ships will carry over twice the amount of cargo, 12,500 twenty-foot equivalent units (TEUs), compared to the current Panamax ships that hold no more than 5,000 TEUs.
The expansion has prompted many countries to modernize their port systems to reap the benefits of the expected boost in ship traffic. Unfortunately, the United States does not currently have the infrastructure to accommodate the excepted number of larger vessels traveling through the Panama Canal. The only East Coast ports currently equipped for post-Panamax vessels are the Port of Baltimore, the Port of Virginia, and the Port of New York and New Jersey. Bigger ships and more cargo will bring economic gains, but will also strain the capacity of ports in the Gulf and along the East Coast. Port congestion is becoming increasingly common at major U.S. ports and this problem could have major implications for the $900 billion worth of goods imported and exported to and from the U.S. each year.
According to AAPA data, of the 161 ports in South and Central America, only 21 have channels with the depth required for post-Panamax vessels, and 13 of those are in Brazil. Countries such as Costa Rica, Peru, Jamaica, the Bahamas, and Cuba are trying to expand their ports in order to meet the demands that will be caused by the Canal expansion.
In 2015, the House Appropriations Committee approved an amendment to add $36.3 million to funds available to the Army Corps of Engineers for harbor improvements. The AAPA states that $28.9 billion in investments are required, including improvements to road, rail, and tunnel infrastructure needed to move goods efficiently to and from ports. President Obama’s FY2016 budget request of just $915 million for port maintenance, dredging, and other work, represents only 50 percent of the expected revenue generated by the Harbor Maintenance Tax (HMT), a levy on imported goods to cover the costs of maintaining port infrastructure.
Budget limitations imposed by Congress and sequestration have limited the amount of money that can be used out of the Harbor Maintenance Trust Fund (HMTF). Since funding for port harbor maintenance is part of the Energy and Water Development Appropriations Bill, it is subject to the same budget caps in place across federal spending via the Budget Control Act of 2011. Consequently, the full funding that Congress has authorized from the HMTF cannot be spent.
Structural updates to the country’s ports, channels, and harbors is needed in order to accommodate the increase in port traffic caused by the expansion of the Panama Canal. Without major investment in water infrastructure, the United States stands to lose out on one of the biggest opportunities to compete in the global marketplace.
For more information contact Michael May at Michael@Warwickconsultants.net.