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lgllQ71 C857.::, ,i;gpg,." j~gi>!~',,:,:pp QW<45@A4+5,:, ',.;?' the Future of the Panama Canal By Norman J. Padelford 4 Stephen R. Glbbs
ln preparing the study the authors have looked closely at the operation of the waterway today. It examines trends in cargo movement, and in ship- building. Studied also are the limits of capacity of the Canal. The fundamentals of toH policy have been consideredand a toll strategy for the future sought, Alternatives have been weighed for en- larging the Canal. The authors have ventured into the field of pohcyto considersteps to modernizing treaty relationshipswith the Republic of Panama, helievingthat the larger picture of engineering, technological change, economics, and decision- making are all tied in with effectivehandling of Canal questionsin the yearsahead. This workanticipates the areaof changethat lies ahead,and suggests that by capitalizingupon tech- nologicalinnovation the Canal can promote ex- pandingmarkets and growing industry. By givinga broadspectrum of trendsand prag- rnaticpossibilities, a base is providedfor assisting the businesscommunity and the publicin forming judgmentsof what mannerof shipsto employon Canaltrade routes and what mannerof changesto make at the Canal itself. There are questionsof judgment whetherthe UnitedStates should lay out thesums of money thatwill berequired to enlargethe capacity of the waterway, and the degreeto which considerations of nationaldefense interests will play a partin this. The authorshave not attemptedto touchthese questions,feeling that they demanda specialex- pertisethey do not have.They will, however,be involvedin decidingwhat the countryshould do with the Canal for the future. "By lookingat the changesin maritimecoru- merce,and the scientificand technological innova- tionsmade possible by modernengineering tech- niques,the authors have brought new perspectives to hear upon the operationof the interoceanic canaland the optionsthat areopen to the United Statesin this area.They recognize that there are many uncertaintiesalong the way, but are con5- dentthere is a futurefor rising trade and maritime transport."Alfred H, Keil,Dean, School of Engi- neering,Massachuset tsInstitute o f Technology.
1SBN 0 87033 202-3 $12.50 MAR I TIME COMNI E RCE AND THE FUTURE OF THE PANAMA CANAL '«>~
NORMAN J. PADE L FORD
STEPHEN R. GIBBS Department of Ocean Engineering Massachusetts lnrtitute of Technology
Introduction by
Alfred H. Keil Dean, School o f Engineering Mauachasetts Institute of Technology
M.l.T. J Report No. MITSG 74-28 SEAGRANT PROGRAM f index No.74-328-Npt
CORNELL MARITIME PRESS, INC. CAMBRIDGE 1975 PAARYLAHD Copyrights, 1975 by Cornell Maritime Press, Inc.
All rights reserved. This work is a result of research sponsored by NOAA Of6ce of Sea Grant, U.S. Department of Commerce, under Grant No. NG-43-72. The U.S. Government is authorized to produce and distribute reprints for governmental purposes notwithstanding the copyright notation that appears here. With the noted exception, no part of this book may be used or reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. For information address. Cornell Maritime Press, Inc., Cambridge, Maryland 21613
Library of Congress Cataloging in Pubhcabon Data Padelford, Norman Judson, 1903- Maritime commerce and the future of the Panama Canal. Report - MassachusettsInstitute of Technology, Sea Grant Program; MITSG 74-28! "Index no. 74-328-NPT." Includes bibliographical references and index. 1. Panama Canal. 2. Shipping Panama Canal. I. Gibbs, Stephen R., 1947- joint author. II. Ti- tle. III. Series: Massachusetts Institute of Techno- logy. Sea Grant Program, Report - MassachusettsInsti- tute of Technology, Sea Grant Program; MITSG 74-28. HK537.8.P33 386'.444 75-2305 ISBN 0 87033 202-3
Printed and Bound in the United States of America TABLE OF CONTENTS Pyric Chap ter LIST OF ILLUSTRATIONS...
PREFACE INTRODUCTION by Alhed H. Keil . MARITIMEADVANTAGES OFTHE INTEROCEANIC CANAI Roleof Canalin UnitedStates Foreign Commerce ~ ~ ~ 1 4 Distance Savingsof Canal... Tel e Advantages .....,....,...... ~ ~ ~ 9 Savingsin FuelConsumption...... e ~ e 11 FactorsBearing on Choiceof Routes...... 11 PrincipalRoutes Served by Caoal...... ~ ~ ~ 13 New Developmentsand Old Advantages ~ ~ ~ 14 Extendingthe Maritime Advantages of the Canal... ~ ~ ~ 19 TRANSITING THE PANAMA CANAL The Broad Vcevr...... ,...... ~ ~ ~ 23 preparIng fOr inuLmt ...... ,...... ~ ~ ~ 25 Pilotageand Scheduling of Transits ~ e e 29 Proceedingthrough the Canal 31 NavigationProblernS in the Canal... ~ ~ 38 Long-RangePlanning to ExpediteTraffic 92 ~~ 39 ~ e ~ 40 ConCluslon ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ USEOF THE CANALBY OCEANSHIPPING Shipsthat Pass in the Dayand Night ...... ~ ~ ~ 43 Patterns of Ship Traffic ...... ,...... ~ ~ ~ 45 Useof Canalby Shipsof DifferentNationalities ~ ~ ~ 50 Traffic by Typesof Vessels ...... ~ ~ 57 Current Trends in Canal Traffic...... ~ '~ ~ 63 The Cost of Transitingthe Canal ...... ~ a ~ 71 e 71 C onchmon .....,...... CARGO AND TRAFFIC TRENDS GeneralCharacteristics of Cargo Movement 75 Growth Patternsof CargoMovement . 83 Projectionsof PresentTrends . 85 94 Temsit Forecast.... ~ ~ ~ ~ ~ 101 Conclusion 5. THE LIlNITS OF CAPACITY Limitationsin the PresentLock Canal .... ~ ~ ~ 105 Estimated Capacityof the Canal ~ e ~ 112 Standardof ServiceAfforded by Canal ... ~ e ~ 114 hnprovementsto Extend Capacity...... 115 ~ ~ ~ 124 Co nciuSIOn e ~ ~ ~ ~ ~ e ~ ~ ~ ~ ~ ~ e ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ e ~ e ~ ~~ CONTENTS TOLLS: THE COST OF TRANSlT1NGTHE WATERWAY
ShortHistory of thePanama Canal Toll System ~ ~ 126 ThePanama Canal Toll Systemin Operation...... 129 CanalFinances and the Need for a NewToll System 129 Views of American Merchant Marine ~ ~ ~ 133 Fundamentalsof Toll Policy ~ ~ 134 PossibleToll Systems...... ,...... , .. ~ ~ 140 OtherToll SystemsNow in Use ....,...... 140 Proposalto IncreaseToll Rate ...... ,... 143 Future Toll Strategies ~ ~ 145 Conclusion .. 148 ALTERNATIVES FOR THE FUTURE OF THE CANAL
TheRevolution in Modesof Shipping ~ ~ ~ 161 Alternativesfor Handlingthe Canal ...... ~ ~ ~ 154 1. KeepExisting Canal Functioning...... , 154 2. Constructa ThirdLocks System 155 3. A Sea-LevelCanal from Logarto to Puerto
Caimitoin Panama,...... , ~ t ~ 161 4. A Sea-LevelCanal in theCanal Zone ...... 165 6, Other PossibleCanal Routes 169 6. SellCanal to Panama.'Get Out of Canal Buslfless ~ ~~ t ~ ~ ~ ~ ~ + ~ ~~ o~ 172 7. Other Transfer Possibilities 173 Summary . ~ 0 ~ 0 + ~ ~ ~ ~ ~ ~ ~ ~ ~ 0 ~ ~ 176 Towardsa NewTreaty Relationship 176 IssuesRelating to NewArrangement ...... ~ ~ 180 EconomicValue of theCanal...... 182 NationalSecurity and Other Aspects of theCanal .. 183 Conclusion....,...... 184 CONC LU810N S CanalAdvantages...... ~ ~ 188 Trend to I argeVessels 188 CargoMovement and Traf6c Estimates ...... Limitationsof Capacity 189 Costof CanalEnterprise ~ ~ 189 ~ ~ 189 Toll Strategies 190 Impactof Land-and Mini-Bridges ~ ~ 190 ThirdLocks Plan ....,...... ,...... ~ ~ ~ 190 Sea-LevelCanal Plans...... , . ~ P ~ 191 Staywith the Present Canal Indefinitely 192 A New Treaty ~ ~ 192 MaintainingUnited States Leadership + 193 1NlJEX . 195 L 1ST OF I L LUST R ATIONS
Fi gI>n' Frontispiece.The Panama Canal from the Air
1. Percentoi U.S. ForeignCommerce Using Canal....., .. 38 2. ShipsAwaiting Transit in Lirnon Bay...... ,...... 12 3. PrincipalTrade Routes via PanamaCanal...... 18 4. Quantityof "Gencom"Transiting Canal Map of Panama Canal Zone 24 26 6. S,S.Ancona Is First Through the PanamaCanal 28 7. CanalPilot DirectingI.arge Ore Carrier Through Locks View of Gatun Locks 32 T.S.S. Tokyo Bay in Lock Chamber 33 34 10. Gaillard Cut Looking South . 36 11. Fog Creeping into Cut 44 12. S.S. Arctic at Canal 48 13. Panama Canal Transits 54 14. Traffic by Nationality of Vessels 58 15. Traffic by Types of Ocean Vessels...... 64 16. T.S.S. Tokyo Bay in Pedro Miguel Locks ...... 66 17. Transitsby AverageGross Tons Leading Users..... 68 18. T.S.S. Universe Japan...... 79 19. Growth and Composition Canal Trades 80 20. Originsand Destinations of Cargo:Pacific to Atlantic . 82 21. Originsand Destinations of Cargo: Atlantic to Pacific. 92 22. Forecast Total Canal Cargo ~ ~ 96 23. AveragePanama Canal Net Tonsper Vessel...... 98 24. Forecast Panama Canal Transits . 106 25, Maximum Ship Size ...... 107 26. LargeShip Entering I,ock... 111 27. Cross Section of Lock Chamber,...... , 113 28. ForecastTotal OceangoingCommercial Transits 116 29, AverageTime in Canal Zone Waters .....,, . ll & 30. Deepening Program 122 31. Marine Traffic Control Center 123 32. Artist's Conceptof New MarineTraffic Control Center .. 156 33. Third Locks Excavation ...... 158 34. Mapof ProjectedThird LocksSystem ...... 162 35 Possible Sites for Sea-Level Canal...... , . 163 36. Route 10 North of Canal Zone...... 166 37. Routes 14C and 14S irI Canal Zone 38. Possible Alternative Routes Outside of Isthmus Nicaraguaand Costa Rica Boundary...... 168
VI I Canal Company who have taken hours to discusswith us problems of running and modernizingthe waterway.We expressour gratitude to them warmly, including Governor David S. Parker, President of the PanamaCanal Company; Sidney Kaufman, Chief of the Executive Plan- ning Staff; Hugh A. Aoms, Deputy Chief; CaptainDonald A, Dertien, USN ret.!, Director of the Marine Bureau; Colonel A.L Romaneski, Director of the Engineering and Construction Bureau; Philip L. Steers, Jr., Comptroller; Gerard Welch, Chief of the Marine Traffic Control System DevelopmentOffice; Robert Lessiack,Deputy Comptroller; Donald Schmidt, Chief Economist; Thomas M. Constant, Secretary of the PanamaCanal Company, and Mrs. Hazel Murdock of the Wash- ington Office. Colleagues on the faculty at M.l.T. have been a source of help in YRKFACE manyways In particular,Dean Alfred H. Keilof theSchool of Engi neeringfirst suggested this studyto us,and has assisted with counsel andfinancial support. Professor Ira Dyer, Headof the Departmentof OceanEngineering, gave us encourageme~t,advice, comments, and releasefrom academicduties when the going becamedifficult. Dean A. Horn,Executive Officer of the M.I.T. SeaGrant Program, has beena constanthelp on administrativematters. Professors Philip Mandel, Alaa Mansour,John W, DevanneyIII, C. Chryssostomidis,and Henry A Marcusaided us at many points alongthe way with information relating to shipping,transport, and marinecommerce. This researchand study was supported jointly by a fund from the NOAA Office of Sea Grant, U.S. Department of Commerce, Grant Yo. NG-43-72, from the Henry L. and Grace Doherty Charitable Foun- dation, Inc., and from the MassachusettsInstitute of Technology. This supportenabled us to visit the Zone on severaloccasions, to develop computerprograms relating to cargoand traffic, and to bring the results of the study to publication. We are aIso indebted to the editors of the Jourrralof MaritimeLaw and Commercefor permissionto reproduce parts of an article that originally appeared in their columns. We also expressthanks to the Natonal GeographicSociety for use of their aerial photograph of the Isthmus. Thanksare due to JamesH. Wakelin,Jr., former Assistant Secretary of Commerceand Chairman of the President's Task Force on Oceanog- raphy,for suggestionsrelating to ChaptersVII and VIII, as also to ColonelJohn F. Sheffey,formerly ExecutiveDirector of the Atlantic- PacificInteroceanic Study Commission, and Special Adviser to the Officeof InteroceanicCanal Treaty Negotiations, Department of State. Weare aLso indebted to Dr. ImmanuelJ. Kletteof the Battell Labora- tory,author of From A tlantic to Pacific.' A New Interoceanic Canal, for readingthe manuscript and offering many helpful suggestions on the treatmentof variousparts. The critiques and comments of theseauthor- itieshave aided us substantively inthe task of authorship. Weexpress appreciation toGordon Stewart Lingley, formerly with theMilitary Sea Transport Office atthe Canal Zone and to Li H T ofo Siningapore a for insights into the impact of superships onCanal traffic demand,andfor a studyofthe land- and mini-bridge developments uponCanal commerce, during their periods asgraduate students in fortyping themanuscript withexceptional excellence. Wealso express ourappreciation toour wives for their advice and help throu~~out the monthsof authorship.
NORMAN J. PADELFORD Cambridge,Massachusetts STEPHEN R, GIBBS I NT ROD UCT l 0 M The Panama Canal has been in operation for sixty years. In these years the world has changed much. More than fourscore nation states are now on the world scene that did not exist when the Canal was opened to navigation in 1914. International commerce has expanded from a few hundred million tons a year to over 2,700,000,000 metric tons, much of it moved between nations and continents by ocean shipping. Postwar patterns of business are changing many traditional relation- ships and practices. Registrations of nearly a quarter of the worM rner- chant fleet are now placed in countries other than where their true owners are situated in order to gain entrance into sheltered markets, or to obtain the benefits of low fees or less expensive labor. Multinational companies, joining firms and operations in different countries, are becoming widely used in corporate life to promote international business. More importantly, from our point of view, a technological revolution is sweeping the world mercantile fleet. Ship sizes are increasing progres- sively. There are today, for instance, over a thousand vessels that are too large to be admitted to the Panama Canal locks, and nearly twice as many more that can go through the locks only if they are less than fully loaded. Dry and liquid bulk carriers are being constructed in Europe and Japan that are over 300,000 tons in capacity, too large for accorn- modation in the narrow, relatively shallow waters of the interoceanic passageway.The small general cargo freighters of yesteryear are giving way to large, highly specialized types of vessels. Before 1970 practically the only specializedtypes of vesselsgenerally known were oil tankers and ore and bulk carriers. Today Lloyd's Regis- ter of Shipping lists 21 different types of ocean vessels,including refrig- erator ships, containerships, roll-on roll-off ships RO/RO!, oil and ore carriers, oil and dry bulk and ore ships OBO!, special petroleum prod- ucts ships, lighter-aboard ships LASH!, automobile carriers, and others. As more specialized ships are being built, a downward trend is occurring in the use of general cargo vessels with their greater labor intensity in the handling of cargo. Containerships are a revolutionary change in maritime commerce made possible by the advent of the sealed modular container. The fast turn-around time of these vessels in port, their efficient manner of stowing containers above as well as below decks, and the low pilferage and breakage of boxes sustainedwhile en route, thereby lowering insur- ance charges, appeal to shippers. Furthermore, the big containerships can take the place of as many as five general cargo freighters due to their efficiency af loading, thus effecting significant savingsin the use of shipping. The container revolution is not only a novelty in cargo erricrenuy,at moderatetolls, andwithout discriminatingamong users. xiii Ita lac ks, however, with their fixed t!lnlenSions trn'fNNClitllitattofN Qn the caller ity of the Canal. A develoliment that wll] llavi atl irnliortant hearing Upon the future of tile ifltt'tl>L'earli caJlal ILndthe tilde that funiletS through it iS that Qt the lstld- and mtnl bridge ayahills tiilng fOStare! hy 'rlited,ital rlil. rosils t4! fnQVeciirltalnefs Rt,r i%I the c itltilleilt on fast. Utt92tIMtrajna, synchrofltxld with sh'ill arrivalsiNld de!iartUAM for ov%rtkai%, Already, Wiw~klySerVt eshave IXw~ninstituted frotn %est 'IiaSfpirta tel S!iced tlehvi riiw tIi thi Vmt C'east. The mini tirldge contempt,involvtng «>n» MAR I TI ME COMME RC E AND THE FUTUR E OF THE PANAMA CANAL aaoar ua vo us vas~~ ! Alllcu cL5%IlczLjUL Uvon Lo LR ocBKR1pplllg community. Distancesof 6,000 miles and more were savedon some of the principalworld traderoutes, thereby reducing time spentat seaand affording economiesto seabornetransportation betweenthe Atlantic and Pacific Oceans. In the yearssince the Canalwas constructed, an increasing stream of traffic has turned this into one of the main thoroughfaresof world commerce.Nearly half a millionvessels have transited since 1914. Ships flying the flags of nearly every principal maritime nation movean ever enlargingtonnage of cargo through the Canalto and from the world' s port s. The oceanbornecommerce of the United Stateshas long beena primarybeneficiary of the existenceof the Canal.For manyyears United States flag shipping stood in first place in numbers of traj~sits per year. Althoughvessels flying the U.S. flag mademore than 1,200 transitsin 19'73,vessels registered in Liberia,the UnitedKingdom, and Japaneach outnumbered them. Following after these come the ship- ping of Norway, Greece, Panama,Germany, the Netherlands,and Sweden,Vessels of sixty countries have employedthe Canal in one year, attesting to the broad usefulnessof the waterway to world commerce.' Practicallyevery country f'ronting on or adjacentto the Atlantic and PacificOceans shares to an extentin the.more than 126 million long tons of cargoa yearthat now movesthrough the Canal. Role Of Canli in United States Foreign Commerce The volume of United Statesforeign trade passingthrough the PanamaCanal has increasedsteadily in the postwarperiod, as seen in Table 1. One of the primary reasonsfor building the PanamaCanal was to promote United Statesocean commerce. Table 1 andFigure 1 show the percentageof total United Statesoceanborne foreign commerce passingthrough the PanamaCanal. This percentagehas grown from 10.7 to 17 percent in the past 14 years. Table 2 gives the breakdown by commodity type of the United Statesforeign commerce passing through the PanamaCanal each year and its total estimatedvalue. The valueof cargopassing through the e rje dl O el di C 4 0 Oa C eII dj ejr rdW ld O dl rer O dr ee O Ch lrj 0 eI I f ~ i ~ ~ I ~ i i,l 1 0ld4ld 0 80 0 4U ej ee 4 ej0 K O cv ne 'd O O eII 0 dr e ljr 0 4 C 0 9, epR erIrj CI ~ V C O ld dl f 0r rd f 4 0 el C ter Iij ld D 0 p ~ D 0 0 0 0 C 4 dl jjr 0 id dj '0 el dr X 3 ej dl 4 4 4 nl ej el ie 3 ej je 0 V 0 Q rd O dl dl dj lar 0 p ed ee3 C ej 4 Or - id ej 0 4 ei ed rd Irj 4 Irj Id 0 Iij je e dr 0 ~ C Or el 4 D 4 0 el el 4 0 0 aj p rd ld 0 I ~ ~ I 4 4r WV w V ~a '4 0 0 '0 ej 4 0 sr el 0 rdM el dl er 4 rrj 4 jI ld el rd re 3 ej 0'0 id 0 0 Id C g C 4 0 c rd 0 O rd -w rd p rd 4 rd dt P jJ V X E 0 C! CO cO N C Q l S Q 4 MARITIMEITIME COMMgRgEIFUTUREOF THE PANAMA CANAL Qg~J has almostM d bled since 1950 and has grown even faster than tonnagevolume. tonnageand in value is due primarily to expanding trade between the United States East Coast and Asia. In t he past 1p years theth growth o fapan Japan'seconomy has been phenomenal. The pros- b ht f r continuedgrowth of United Statestrade through the Canal with Japan, China and Australia, provided the energy eris@ does not lead to a major recession. Roughly 66 percent of all the cargo moving through the Canal come from or goesto ports of the United States. This indicates how impor tant United Statestrade is far the well-being of the Canal operation. Japan ranks as the largest originator and receiver of United States trade throughthe Canal,followed by theUnited Kingdom, and West Germany. While the Canal transited only 17 percent of the United States foreigntrade in 1971,this representedapproximately 33.5 percentof the total valueof foreignseaborne United Statestrade that year. Corn- modities transiting the Canal as part of United States oceanborne foreign trade had a high averagevalue comparedto overall United Statesoceanbozne foreign commerce. The lower averagefor overall tradewas due largelyto the volumeof crudeoil the United States importedinto its EastCoast ports from the MiddleEast. In 1971 foreigncrude oil wasinexpensive and little of thispetroleum transited the Panama Canal. Thevolume of UnitedStates cargo carried through the Canal and its dollarvalue give a roughmeasure of the importance of theCanal for UnitedStates foreign commerce, The Canal's role in UnitedStates for- eigntrade is growing and will continue to grow. Assuming theUnited Statesrailroads donot extend their portion of theEast Coast United States-Asiatradebeyond present levels, as much as 25 percent of all UnitedStates forei~ oceanborne commercial trademay be passing throughthe Canalby 1980. KNItanceSavings of PanamaCanal Thereare numerous maritime advantages ofthe interoceanic Canal, lt isthe strategic location ofthe Canal, situated atthe narrow waist of theAmericas, thatgives this shortcut itsgreat advantage foroceanborne commercebound between the two major oceans. ThePanama Canalprovides important savings indistances forship- pingbound between various ports inthe Atlantic andPacific Oceans. A vesseltraveling between NewYork and San Francisco, forinstance, can save7,860 miles byusing theCanal instead ofgoing around Cape Horn. FromNew York to Callao, Peru, 6,237 miles can be saved. From New YorktoYokohama, Japan,6,509 miles canbe saved compared to proceedingviathe Straits ofMagellan, although goingaround theCape MARtTtMF. A[!VANTAGE:.» of 'ood llope or through th» Suez Canal when this is open is shorter than tlie Magellan rou4'. A vessel sailing from New Orleans to Van- couver, B.C., cari shorten the voyageby S,807 miles comparedto going around South America. From Hampton Roads, Virginia, to Yokohama, Japan, the Canal saves 5,666 miles conipared with sailing around the Cape of Good Hope and proceeding across the Indian Ocean. From European ports to points in the Pacific the distance advantages of the Panama Canal are similar. A ship en route from I iverpool, Eng- land, to San Francisco, can cut 5,575 miles off a voyage around South America. From London to Shanghai the Canal saves 3,S92 mites com- pared with t,he Straits of Magellan. F'rom Gibraltar to Callao, Peru, the Canal gives a saving of 3,322 miles. Not all routes are, of course, equally affected. The distance from Bishop's Rock, southwest. of England, to Melbourne, Australia, is 12,312 nautical miles by the Panama Canal. It is 10,754 miles via the Suez Canal when that is open, and 11,630 via the Cape of Good Hope. Normally, traffic from Europe to points in the Indian Ocean and be- yond will go by way of Suez or the Cape of Good Hope. The Panama Canal offers an alternate route to these destinations when Suez is closed, giving the advantage of calls at ports in the New World en route. The Canal also provides a shorter, less stormy route than around Cape Horn. Table 3 shows comparative distances between selected ports by a variety of routes. The principal savings are between ports on the At- lanticOcean generally north of the bulgeof Brazil 5oS!, and pointsin the Pacific Ocean north of 40"S latitude, i.e., Wellington, New Zealand. Vessels proceeding from ports in North America, the Caribbean, northeast South America, Western Europe and the Mediterranean to the West Coast of Latin America as far south as Valparaiso, and vice versa, will save distance by utilizing the Panama Canal compared with round- ing the Horn. Likewise, vessels from ports on the West Coast of North America, Hawaii, Japan, the Philippines, the East Coast of Australia and New Zealand, and from the West Coast of South America as far south as Callao, Peru, proceeding to ports in the Atlantic Ocean north of Recife, Brazil, will save distance by employing the Canal route. Vessels leaving from ports near or below the equator in the Western Pacific i.e., Australia, New Zealander ports south of Callao, Peru, bound to Buenos Aires, Sao Paulo, Rio de Janeiro, or Africa south of Nigeria, have a shorter distance to go via Puenta Arenas and the Straits of Magellan than by the Canal. Much less shipping moves along this route, however, than via the Panama Canal because there are few inter- mediate stops along the way. In short, the Panama Canal is strategically placed for the main body of interoceanic commerce. MARITIME ADVANTAGES Table 3 Com arativeDistances to SelectedPorts Via an l an ternate otttes Right Side l TO i0te 1- We 11- Yoj oh ma Shanghai S ingap ore BombaY bourne ington Distances to Pacific Por:s 9,700 10 84 12,523 NA 9 942 8,523 Relative to 16,209 16,761 16,619 NA 12 93 11,568 Distances from 1 3,026 12,344 10, 137 8,168 12,961 14, 326 New York to IS,269 14,587 12,380 1],382 12,641 14, 132 These Ports 0,0 0 10, 04 12,8 NA 10,262 8,843 KY+ 0 16,074 16,626 NA NA 12,258 11,433 NY - 135 12,500 11,818 9,611 7,642 12,435 13,800 KY - 526 14,970 14,288 12,081 11,083 12,342 13,833 NY 299 9,604 10,388 12,327 NA 9,746 , 327 NY - 196 16, 155 16,707 NA NA 12,339 ll, 514 KY 54 13,185 12,503 10,296 8,327 13,120 14,485 NY + 159 15,270 14,588 12,381 11,383 12,642 14,133 NY+ 1 9,126 10,010 11,949 NA 9,368 ,949 NY - 574 16,582 17,134 NA NA 12,766 11,941 NY + 373 14,383 13,701 11,494 9,525 NA NY + l357 15,762 15,080 12,873 11,875 13,131 14,625 KY + 493 8, 359 9,243 11,182 NA 8,601 7, 182 NY 1341 1 5507 15,645 NA NA 11,277 10,452 NY - 1116 13,618 12,936 1.0, 729 8,760 NA NA NY + 592 l4,279 13,597 11,390 '0,392 11,651 13,142 NY - 990 12,093 12, NA NA NA 10,916 KY + 2393 11,513 12,065 11,923 NA 7,697 6,872 KY 4696 NA 13,348 11,141 NA NA IS, 330 KY + 1004 11,791 11,109 8,902 7,904 9 63 10,654 NY - 3478 NA NA NA NA NA NA NY i 3411 10,669 11,221 11,079 NA 6, 853 6,028 NY - 5540 NA NA NA '0 72 NA NA NY + 2104 12, 172 11,490 9,283 8,285 9,544 hlA NY - 3097 ,0 0 12,954 NA NA 12,312 10,893 NY 4 2370 16, 294 16,846 NA NA 12,478 11,653 NY + B5 10,819 10,137 7,930 5,961 10,754 12,119 NY - 2207 14,258 13,576 11,369 '0,371 11,630 13,121 NY - 1.011 12,033 12,917 NA NA 12,275 10,856 NY + 2333 15,627 16,179 NA NA 11,811 10,986 NY 582 7,907 7,225 5,018 3,049 7,842 9,207 NY 5l 19 13,550 12,868 10,661 9,663 10,922 12,413 NY 1719 I.l, 70 12,586 14,525 NA 11,944 10, 525 NY + 2002 14,006 14,558 14,416 NA, 10, 190 9, 365 NY 2203 11, 81.6 11,134 8,927 6,958 11,751 13,116 NY - 1210 11,658 10,976 8,769 7,771 9,030 10,521 NY 3611 NA NA NA NA NA 11,598 NY + 3075 NA NA NA NA 10,793 9,908 NY - 1600 NA NA NA 8,092 NA NA NY 76 11,220 10, 538 8, 331 7,333 8,592 10,081 NY 4049 1. Compiled from U.S. Hydrographic Office, Table of Oistances. H.O. Publication 141. Washington: Covernment printing Office, 1965. 2. Oistances from Bishops Rock to sample Western European ports are: London. 413 nautical miles; Liverpool. 297 n.m.; Rotterdam 454 n.m.; Bergen911 n. n.; Oslo 947 n.m. A waled nlap shows that tliere are w hat niay be ter'DleGlareas of advantagein the oceans on the opposite sidesof the Anierican conti- nent.It is shorterto proceedvia the PanamaCanal when passing from one area of advantage to another than by any alternate route, As an example, San Francisco is closer via the PanamaCanal to all Atlantic ports except those iii South America south of latitude 30"S. It is also shorter to Mediterraneanports than by any other route. Many of the leadingworld ports are in a position to take advantageof the Panama Canal for some portion of their overseas trade. For much of the overseascommerce of the United States,Canada, >westernEurope, the Caribbeancountries, northern Latin America, Japan,and, to an extent, Australia and New Zealand,use of the Panama Canal shortens sailing distance.This is what pves the Canalits true sign if lcan ce. By shorteningdistances between ports in different oceans,the Canal savestime for shipping,aml helpsreduce fuel and transportationcosts. For commercialocean vessels which made up mare than 390,900 of the over 480,000 transits of all kinds that havetaker> place since the Canalwas opened to navigation the savingsare important in economy of operation, thus yielding higher profits. This makes the Canalattrac- tive to world commerce.Shipping is often waiting in considerablenum- bersat, the Canalterminals for transit fig. 2!. Time Advantages Reductionsin distancesgive savingsin time. The daysthat are saved by usingthe Canal,as compared with the longersea routes, mount up impressively.For instance, a vesseltraveling at 15 knots can make Los Angelesfrom New York in 13 daysby the PanamaCanal compared with over a month via the Straits of MageHan.A ship travelingat 25 knots can make the 9,700-mile journey from Yokohama to New York in 17 days,compared with 25 daysneeded for makingthe 15,300-rriile voyage around the Cape of Good kIope. Table4 givesa seriesof sainpledays requiredat different speedsfor specificvoyages. Thus, a shipbound frain Seattleor nearbyVancouver, B.C., to Europeat, 20 knots can niake Bishop'sRock Light off south- west Kng>andin 17'i. days comparedwith 31 days if it were to go aroundvia the Straitsof Magellan.A vesselhound from London,Eng- land, to WeHington, New Zealand, at 20 knots can make its destinatian ill 23 sea.days by thePanama Canal, or 25 daysby Suezif that is open, or 27'i'~ days if it goes around South Africa. Savingsin time enablethe needsof commerceto be servedby fewer ships,as well as affording fasterdelivery times. Fasterships save fewer days, tile reductions in savingsbeing proportionate to the increase.in ship speed. Savings in iriiIes that have to be traversed mean lowered fuel W CO e ~ ~ 4 ~ ~ ~ m r CO Ill a CO nj kJ Ih AN W&ChCh W Q! gg ~ ~ ~ ~ ~ ~ ~ 4 I a 0 ZON N Ch Ul N R ~N 4 N g rl N N ANN Ch W N LCl Ill C! COW A U 0N ~ ~ ~ ~ a Pl Ch a LA tt' 0 6 O N Pl N Pl R N W N a a D N N Ch W ~ ~ ~ ~ ~ cv Pl & CO D W Ch OP Ch N HPINR NHA a Pl Q4 l g ~ ~ ~ ~ ~ ~ ~ ~ 0IIoo g LP N ltl C Ill N M NNNN NNN Ill rt a lD & W ifl ~ NChR 0 ~ ~ ' ~ ~ 0 ~ ~ ~ ~ a O D W lO N NChN N Pl Pl Pl Pl W Pl N hl 80 4 4 Ch N a/l 0 Qe ChCh W Oj N N Ch Ch CO LD Ch 4l e ' ~ ' ~ ~ egg ~ Efl~g ~ a 4 Ch 44> 0 ChRW 0 l5 N Ch CO a u1 4 ~ ~ ~ ' ~ Q ul N Vl W&@1 N Pl P1 CV Ol Ch 4P NChWH 40 COW ~ ~ ~ ~ ~ ~ ~ ~ ~ CO O 040 %' Pl W Ch lOWH N&CV R&N& W NN 4 Pi+ g7 0! Ch Ul r I wao 0 e ~ ~ I ~ ~ ~ >wan a a P a &Mal OP 43 ee 0 N PIN N c WNNCV Ol Ch O CONN COW N waN ' ~ ~ ~ ~ ~ ~ ~ ~ 0 N W CQ M M ChCh P4 I Mal WNPl N &PIP} N Pl Pl 8 0 QJ 0 e ~ N ~ Q M 4 O 6! 0 ~ N '0 0CIg 0 UC! 0 ~ 5 0 U Ct!O ~ 0 0 Gc CQ D ~ 5 0 UAy Asv! Q W U! Li C4 5 0 0 0 K 10 MARITIME AD VA NTAG ES consumption,as well ascrewing costs, thus reducing transportation costsfor shipperand buyer, thereby furthering overseas trade. Savingsin Fuel Consumption Lowerdistances along routes have a directbearing upon the amounts of fuelconsumed, depending upon a vessel'smechanical efficiency, its speed,tonnage, shaft horsepower,and hull form. lf wehypothesize a small general cargo vessel of 8,000 gross regis- teredtons which would displace about 13,333 tons, such as many that passthrough the Panama Canal, proceeding at 15 knots, with a shaft horsepower SHP!of 6,610, itsconsumption offuel figures as35.4 long tonsof oil per day.3In a 14'/awayvoyage from NewYork to San Franciscoit will burn 512 tons of oil. The same ship taking a 36k-day circuitaround South America would use up 1,290 tons of oileven if it encoUnteredno heavy storms to slowup its progress.If fuel oil sellsat $48per ton, the Canal route will saveroughly $37,000 in fuelcosts alone. A largercargo vessel of 12,000gross registered tons,running at 15 knetsfor the same distances, andconsuming 46.4 tons per day, will save1,018 tons of fueloil, or $49,000,by employingthe Canal route. This is a substantialsaving. Takingas a thirdsample, a modest-sized containership of 25,000 grossregistered tons 1,667 tons displacement!, operating at20 knots, thefuel consumption willamount to approximately 179.5tons a day. In thiscase, use of theCanal can save up to 2,950 tons of fueloil over goingaround South America, making the fuel cost $93,000 rather than $234,000if it wereto gothe longer way. Such a savingcan make a majordifference not only in thecosts of transportationforshippers, butalso in theprofits of operationthe vessel's owners or charterers realize.In a timeof worldenergy shortages, thePanama Canal isseen as a valuablemeans ofsaving fuel, and thus of shipping costs. It thereby helps promote oceanborne trade. FactorsBearing on Choiceof Routes Commercialvessels will normallytake the shortest available route betweentheir ports of departureand destination in order to save costs andtime. Other factors may enter into the choice ofa particularroute, or for a specificvoyage. These include such elements ascargoes to be pickedup or delivered enroute, orders from owners orcharterers, draft andsize limitation in ports,facilities for resupply, and the incidence of tolb upon ship earnings. Considerationsof government policy, and security en route, can af- fectthe choice of routesin specialcircumstances, orfor vessels in governmentemployment. Fundamentally, thedistances involved, car- goesto bedelivered or had,orders from owners or charterers, and increasingly available in the years ahead. Principal Routes Served by the Canal The principal shipping routes passingthrough the interoceanicCanal are outlined in Figure 3. The Canal is advantageousprincipaHy to shipping moving between ! the coasts of North America, ! the East Coast of North America and Asia, ! the East Coast of the United States and the West Coasts of South and Central America, ! the East Coast of North America and Oceania, ! the West Coasts of the United States and Canada and the East Coast of South America, ! Western Europe and the Mediter- ranean and the West Coasts of North and South America. The Canal route is also beneficial to shipping moving between ! Western Europe and Japan, 8! Western Europe and Oceania, 9! the East and West Coasts of South and Central America roughly above the equator, 0! Japan, the Philippines, China and ports in the South Pacific and the East Coast of South America along with the rnid-West Coast of Africa. The Panama Canal is marginally appealing to shipping going from the East Coast of the United States or Western Europe to points in South sucn 55 a~~~wPM ~' mediate portsrts o fare cail are a factorin determiningwhether a vesselw8.1 proceedwest via the e anPm~a Cm~ or go in the opposite direction via Capetown and South u Africa. Vesselsheading for Indian Ocean port weil8 P as e rth and Melbournein Australia,from WesternE urope norm all y take the SuezCanal if that is open, or proceedvia the Capeof MA Hop rathertha goingby Panamaand across the PacificOcea unlessnl they haveorders or a schedulethat calls for touchingat North American,Caribbean, or CentralAmerican ports. Vesselssailing between Yokohama or Shanghaiand Rio de Janeiroor West African ports below the equator must cover approzirnateiy the samedistance whether they proceedvia the PanamaCanal or the Cape of Good Hope. In these instances,factors other than distance alone guidethe choiceof routes. Whatever the coordinates by which ships proceed to destinations overseas,their coursesgenerally are fixed by schedulesand by cargoes to be delivered or picked up. For a substantialportion of the world's overseastraffic, the Panama Canal offers a conveniently-placedshortcut between the Atlantic and the PacificOceans. 'Ihe numberof vesselsusing the Canaleach year indicatesthat a largeamount of oceanbornecommerce finds the Canal routevaluable for business.The useof the Canalby oceancornrnercial shippingwill be examinedin ChapterThree. NewDevelopinents and Old Advantages Newforms of transportationhave sprunginto being sincethe Pan- amaCanal was opened to navigation.Air transportationhas captured all buta smaUamount of thetransoceanic passenger business, causing the expresspassenger liners to be laidup, sold,scrapped, or turnedto the cruisingtrades. Increasing quantities of freightare airlifted overseas eachyear, although in total volume this is stillnot threepercent of this nation'sforeign trade, There are many forms of generaland bulk cargo thatwill continue to move by water for aslong as can be foreseen. Thesewi0 find their way to theinteroceanic shortcut on boardtradi- tional-typeshipping totake advantage ofthe distance-time-transporta- t4n costsavings which this offers. Thesupercamers havenot taken the place ofthe general cargo liners, containerships,tankers,oreships andreefers that are the primary bene- 5ciatiesofthe Canal's presence. 'Ikeyare not likely todo so for a long Mmeto come, although theavailability of deepwater terminals in the UnitedStates willenhance thecompetitive position ofthe big carriers that,can offer economies ofscale combined withlow-cost transpor- ;;=;--'@Ation. Decades willbe needed toalter the patterns ofshipping limited -'.-:quan5ties ofmany raw materials, tropical products, manufactures, and aIDOUIlgng GD aUOQ~.J Inllib ~i CuIi niHU db LUlllpcLICQ %Jill L,DHLMI5 perton mile on an expresscontainership moving at 30 knots. Counting oceantransportation, port transfer charges,and transconti- nental rail freight, the costs for delivering a 20 x 40-foot container in Rotterdam from Yokohama are figured as amounting to $431.88 using the U.S. land-bridge versus $166,48 using a containership running directly by the all-seaPanama Canal route. "Provocativemarketing techniquesexercised by proponentsof the United Statesland-bridge route, Seatrain Linesof New York in particulax,have tended to disguise the economics of the system." Between Japan and New York it is figured that mini-bridge delivery will cost $178.06 more per container, although present rates have been set about equal in order to capture a market. To shippers and customers of highly competitive merchandise the mini-bridge operationdoes have a four-day deliveryadvantage over the all-water route that can be significant. Missing a connection at the West Coast transshipment port, or delay en route across the continent by rail, can wipe out the advantage, or come close to it, however see Tables 6 and 7!. Ocean shipping has been able to retain the major share of the con- tainer cargo by putting on modern containerships that combine the advantage of fast sea delivery with avoidance of transshipments in ports, the possibilities of missing connections, being held up by U.S. dock strikes,having cargoeswrongly routed, and delays or tie-ups in crossing the continent. 1B MARITIMECOMMERCE/I'UTURE OF THE PANAMACANAL TheltlteN!ceatlX shortcut Offers strong advantages in this competi- tion.At thepresent time, unit trains are reported to bemaking weekly departuresbetween New York and Oakland, Long Beach and Seattle oo tranSconbnentajruns. MOstof the h.afficbOme by thesetrains is cggriedon mini-bridgerootings. Tabje 5 8 nd Transit Times' Land Bridge panama Canal Route Miles Da a Nx les Da s Yokohama-Nev York 1,2 Yokohama-Los Ange lee 4,8OO 9.O Boa Anqelea-New York rail 30000 5,0 Yokohama-Nev York Canal delay time 9,700 17 ~ 5 1.0 Total V 800 14.0 9,700 18. 5 Yokohama-Loa Ange les Tranafer3 4,800 9.0 4 2,0 Low Angeles-New York rail Transfer 3 3,000 5.0 New York-Europe 2.0 3,100 7.0 Yokohama-Europe Canal delay terre 12, 500 23. 0 1.0 Total ll,'500 25,0 12,500 24.0 1 NOTES: No prov>axon made tor port, tame since it 1s common to both routes. 2, Sea t Erneaswumea 2 3-knot ship or 552 r1autioal ml loll per dap. 3 Awaumemoptimum WLtuatsar1Of dSreCt transfer betweenwhip and an avaxting unct: train. 4Transit time based onAtchison, Topeka and santa Ve Railroad proposal. 'Fromlnteroc ante t'anal Stcdtes, 1970, lnteroceantc Canal study''tommtssr.n, sra.T!tnttton, 0.C'., %070, p. IV-120. MARITIME ADVANTAGES 17 Table 6* Compar ison of Costs for Land-Bridge and Panama Canal Routes: Y ok oh a ma -F u r ope 20x40-foot Container Yokohama-Los Angeles - g days 0 S6 IS 7 S 58,68 Port trans f e r charge 30, 00 Ship delay 2 days ia $4.39 8. 78 Proposed ATS F rail charge special unitized t rain Los Angele s to New York City 5 days 250. 00 Part t rans fe charge 30. 00 Ship delay 2 days i~ $4.39 8. 78 New Yo rk-Rot terdam - 7 days i" S6.5 45. 64 Tot,al cost per container - 25 days S431. 88 All-Se a Panama Canal Rout.c Yokohama-Rotterdam 24 days ~ S6. Sl>6. 48 Panama Canal toils 10. 00 Total cost per contairer S 166. 48 Difference - land-bridge excess S265. 40 N JTE: .n comparison with th» direct scv route, ships wf 1 1 have por t t imc a t. e i ther cnd of the land- br dgc. An allowance of 2 days at each port to arr ice, d ischar ge cargo and dei>art. was assumed. *Interoceanic Canal Studies, 1970. Report of the President' s Interoceanic Canal Stud, Cormission. ashington, l970, IV-123. Tabie 7*> Com ar ison of Costs for Mini d Panama Canal Routes: Yokohama-New York 20x40-foot Container Yokohama-Los Angeles - 9 days S6 52 S 58. 68 Los Angeles New York rail - 5 da s 2>0. 00 ays ~0IP. 666 All-Sea Panama Canal Route Yokohama-New York 18. 5 days '~ S6. 52 S 120. 62 Panama Caral tolls 10. 00 l~i7 D if ference - mini-hr idge excess S 178. 06 **Ibid,, p. IV-124 1920 Price af ve Cencoi ed as Paid pa ve; by San Franc i sco Cons ua!e ra ve N Price af Gene oia ur ve: as Paid osed PP* urve: en PP bv .'!an Frani taco .! i I!!! Valera ~encomTransiting the Canal Boundfor pan Francisco Fig.4. Qiiantity of "noncom"transiting the Canal 18 MARITIME ADVANTAGES The land-bridge is not positioned to offer fast, inexpensive d l of generalbroken-lot cargo, nor to transport heavy shipP~rscontinue to enjoy the advantagesfor which the P was built. Extending the IVlaritime Advantages of the Canal %hen the Panama Canal opened for navigation, it represented a tech- nological leap ahead in international transportation, extending the advantages of ocean shipping by the introduction of the interoceanic shortcut. Since that time, other modes of transportation have intro- duced new means of carrying goods and passengersand mail, They surpassocean shipping through shorteningtime of travel and introduc- ing new conveniences,as by air transport but at greater cost. The large bulk carriers, on the other hand, have been increasing their efficiency and lowering the costs of transportation through introducing economies of scale, automation, and improved mechanical efficiency, but they can only be used where deep ports are available and they require large volumes of cargo to make their employment economical. The development of these new modes and their effect on the cost of oceanborne shipping can be visualized with the aid of Figure 4. This depictsthe supply and demand curve for a fictitious general commodity which can be called "gencom" which couM be grain, lumber, crude oil or etc. The fictitious commodity "gencorn" is used instead of grain, coal, etc., because the supply and demand curves for any particular commodity passing the Canal are not known. "Gencom" could have been any commodity carried in trade through the Panama Canal in 1920 on any trade route. Assume it moved on a route from New York to San Francisco as an example. In 1920 N tons of "gencom" were traded and they cost P dollars per ton to the consumer who purchased it. Assuming the Canal had been out of service in 1920, "gencom" would have had to be carried around the Horn in the small, slow ships of the period or moved by rail across the continent. Use of these modes would have cost more than using the Canal. This situation would have resulted in an upward shift of the supply curve by the amount of the additional cost of shipping K in Figure 4!. Since the cost would have been higher, fewer consumers would have purchased it, and the volume traded would have been N* soM at price P+. For the 1974 figure "gencom" was selling at price PP and NN tons were moved through the Canal and sold in San Francisco. Had the Canal been turned over to Panama that year and Panama had refused to let "gencom" transit, supplierswould have been forced to seek other alternatives. But in 1974 the alternatives included superships sailing around the Horn, air freight, pipelines and transcontinental unit trains. None of these alternatives existed in 1920 to any appreciable extent. The new modes of cargotransport were cheaper,relatively speaking, --ra- J 0 ev motivesonthe lock walls, better lighting in the Cut,~ vv~laUJVltand so VLforth. JJlVi% JV% V 'Alekey to the continued usefulness ofthe Canal will be its ability to planesuse moreenergy than the standard-sizecargo vessels tha rn e upthe greater part of thetraffic using the Canal. As the energy shortage is likely to be of long duration,it is reasonableto assumethat the maritimeadvantages of the PanamaCanal will not be supersededin the foreseeable future. %e shall consider in Chapter Seven alternativesfor extending the maritimeadvantages of the Canal.Meanwhile, the Canalwill continue to be usefulto the oceanbornecommerce of nationsup to the limits of its capacity. The most likely mannerof removingthe limitations that now exist, and extending the maritime advantagesof the interoceaniccanal, appearsto be replacementof the present lock canalwith a sea-level waterwaythrough which both larger shipping can passand larger numbersof vesselsper day and year can be transited.This is a logical stepDi improvingthe usefulnessof the Canalwhen the time is right. Appropriatelydesigned and constructedthis couldserve the needsof commerce for another century. CHAPTER ONE FOOTNOTES 1. Yearsmentioned are fiscalyears ending June 30th unlessotherwise stated. 2. Thisfigure must be carefullyinterpreted as it saysnothing about how much the United Statesbenefits from U.S. cargoestransiting the PanamaCanal. 'Ihe profits reaped by suppliersand receiversof commoditiesmoving in trade are determinedby the terms of trade which are the detailsof supplyand demand, For example,until 1974 the UnitedStates benefited from inexpensive foreign oil. The terms of trade have now changedand oil exportersare reapingthe benefits. 3. The figures are arrived at by using the formulasSHP = .00345x dis- placement!~ x speed!, and the tons of fuel consumed per day SHP/186.6. This is an empiricalformula arrived at by navalarchitects. MARITIME COMMERCE/FUTURE OF THE PANAMA CANAL Bte~art Q. Lingleyand NormanJ. Padelford,"Effect of Supershipbuildingon CanalDemand." M.J.T. Sea Grant Program,Interoceanic Canal Project. Draft ReportNo. 10, March1973. Ship operating costs were figured at $6,350a day for the 60,000 dwt carries»and $13,250 per dsy for the very largeships. It is that the srnaJ!er ships going via the Panama Canal can make the 19 200-mileround trip in 67 days,allovring four daysin port, while the larger v~ts will require89 days for the 30,600-mile circuit via Good Hope. 'Ihey wll on theother hand, carry more than four timesthe amount of coal pertrip sndavoid paying Canal tolls costing $48,000 a roundtrip for the smallerships. InteroceanicCerro Studies, l970. Reportof the President'sInteroceanic Canal udy Commission.Washington, 1970, p. IV-120, 7. R F. Qibney, "ShippingLines Are Winningon Europe/Far East Run," Sea- frode, March 1973, pp. 41-46. 8. PdggrmoCanal Traffic, Capocily,and Tolls, Hearingsbefore Subcommittee on panamaCanal, Committee on MerchantMarine and Fisheries,U.S, Houseof Representatives,91st Congress, 2nd Session, April 2Z, 1970,Serial No. SI-Z5, p. S. y. yon his, arelyms> e, oe tne w rs T'uR. I .ifKi7eeatm%%is- ing out to meet the Atlantic Ocean. Southward from the Atlantic Viewed in reversefrom far above the Atlantic entrance to the Canal and the port cities of Colon and Cristobal,the prominentfeatures in the foregroundare the massivethree-step Gatun Locks that raiseand lower vessels 85 feet from sea level to summit lake, and the mile-long Gatun Dam that holds back the ChagresRiver and Gatun Lake. Behind theseworks lie the 163 squaremiles of Catun Lake holding the water I ~I t~ Figure 5, bmce anen a ceaseless vigu., cuniuiueu ureuy>ng, ivweixrig vie ~Iupe~ vx the hills, widening the Cut, and periodic maintenance of all mechanical elements of the locks, has kept the Canal in excellent working order. Notwithstanding the continual use, vessels are locked through in practically the same time today as in the first year when the numbers were in the hundreds rather than thousands. The Canal has become not only a marine highway between the oceans; it has become as well a link between continents and nations as traffic has funneled an unending flow of oceanborne commerce through the waterway. To comprehend the Canal operation as a going concern, it must be seen at water level, as from the deck of a transiting ship. Preparingfor Transit Passagethrough the Canal requires close cooperation between per- sonnel aboard vessels, authorities on shore, and attending tug masters, especially at the approaches to the locks. The behavior of vesselsmust be watched with minute care, and the masters, officers and personnel aboard them must be ready to respond to the requests of Canal pilots ared the orders of Lockmasters to avoid harm to vessels or locks. The procedure for transiting the Canal, and the law relating to it, are fairly elaborate.2 Arrival at Terminal A vessel must communicate with the Port Captain's Office at Balboa by radio or through its agents 48 hours before its arrival at the Canal to allow for arrangements to be made for its boarding, assigning of pilots, transits, remeasurement is made befare clearance is gra~ted. gQ" Q C 0 -4 7~6 C7 ~ E 0 Q ca g Q E p p r~ SA gv ' "e,"i IH a 1 'Q p WJ W eo 0 ~ E Q QA~ Q H C ~ g J "~ 'u- Q p «5 rteposlts 8E a/!proverb% Oan Ks, De r ore tn e vesse~& ~rot'etKl r~rle' IO :kS. FOr !Overnnlent,-OW1!ed '.u'irI01!era ed VeSSelS,UredltS are taken ln 1!lell of Cash payment With set tlenleIlts lnade between Federal agen- eles Ln M ashlngton, Heeeptian Of PilOtS i!nA r'Urdr'1'S 9;hen the boar ling fornlalities are ompleted the vessel is cleared for transit,. Pilotage is cornl!ulsory with a Canal pilot beirlg in full corltrol of a vessel.' ln tlnle. Of Dational enlergency, of if 92tl s otheDA'ise felt, tted States luards may be posted wherever the Governr>r indica'es. :,'ustonlarily they are station Role of r:anal Pilot %hell a vessel ellters the Canal w'BterS, COntrOl Of tts navigation Bnd1 rnOVernents iS plaCed under the hallds of a ';anal pllOt,. i[t.iS the duty of the. ship s Master tr! be on the. bridge when «ntering r!r leaving the locks and when going through the Cut, to inforrll tile pilot of individual peculiarities in tile handling of the ship. lt i» also his resporlsibility t<> see that the pilot's orders are carried out. If t,he Master or another person glv s an orrler corltrary to that. r!'f thr pilt>t., or fails to r.onfnrm to the orders of the pilot, alld at> accident, o ours, 4hc Mash:r is respon- Sible, aS, in gerleral, in hart>or Situatior!S The Ship fnlay l!e libeled pend- ing settlement of the eticulavly it!f!pOrtar1t as a Vessel iS al!proaching, moving through, and leaving the looks. Jt is also critical i11 '.he Cut where wind and fog 1 all affect tl!e navigation of a vt'ssel, Two pilots are; generally put on board large vessels. Four pilots are used orl tile large ore carriers and tankers witll one StatiOned on each I CP I Vessels can anchor at Balboa, Cristobal, Gatun Lake, Garnboa, and tie up at Gatun, Pedro Miguel and Miraflores as required and as directed. Proceedingthrough the Canal Vessels generally are directed to proceed into the Canal as soon as the Canal pilot is aboard. Moving from Lunon Bay, at the Atlantic end of the Canal, a vessel first passes through a dredged channel seven miles long to Gatun. Transiting the Gatun Locks As a vessel approaches the locks, whether at Gatun at the Atlantic end, or at Miraflores on the Pacific, a team of Canal linehandlers is taken on board from a launch to handle the cables that are attached to the towing locomotives on the lock walls. At the Gatun Locks a vessel is raised, or lowered as the case may be, in three consecutive chambers a total of 85 feet to the level of Gatun Lake fig. 8!. The chambers at all of the locks are nominally l,000 feet kong, 110 feet wide with rubber fendering at each end, and have 42 feet of water over the sills. Transiting a vessel at Gatun takes approximately one hour. The time is somewhat less for small vesselsand considerably more for large ships that have little room to spare. When all is in order, a chain fender is lowered in front of the first lock gate and the vessel is pulled into the lowest chamber. There the lock gates are closed behind it, valves are opened allowing water to flow down from above into the chamber until the vessel rises to the level of the second chamber. The gates in front of it are then opened and it is towed by the locomotives into the second chamber. There the same procedure is followed to raise it to the level of the third chamber and of Gatun Lake. Normally, two electric locomotives are employed on each side of a vessel to move it through the locks. These run on a track and cog raH with speed controlled to maintain cable tension and pull. More locomotives are used for the largest ships. One of the largest commercial ships to transit the Canal has been the T.S.S. Tokyo Bay, a 36,000-gross-ton containership of British registry. The dimensions of this ship, 950-feet-long, 106-foot-beam, allowed less than two feet of clearance on each side. Experience has shown that these ave about the maximum dimensions that can be accepted for commercialvessels fig. 9!.' Within the lock areas movements are directed by the pilot in coordi- nation with the !ockrnaster. The lockmaster is in direct contact with the operator of the lock gates and water valves in the control tower. Within the lock tower a control board displays the positions of the gates, chains, water control valves, and mater level in each chamber. Text continues on page 35.! ! P ClJ,IgQ G E ,'ez ' g,'p~9p 0 Wh r r<,,'"y .",~p/:~gj,;:, ji':,~ //jzji ~~i x 'Y '0 45 ~We R-'4$ "''~f:ZP "l ~@ ~..i< - 7 : p d5 44 C!8!!t; !~OC!B!SP.! ' 4! M!S!l AWBV !!'0!!TTfIP, I!;BE, Fog is still a problem at the Cut, tying up navigation through the Cut on an averageof 65 nights a year Pilots pull off «nd «nchor at :arIIhoa, going stivtllbound lf advisedto by the Navlgation Dlvlslon { fig. 1 1j. Net lighting and Sigrlaling are a 11elp, but pilots Still feel uncertain about navigating the Cut, ln t,he fog. 1 orrt'.rltialrail'ls which can drasti- cally cut visibility also ti» up traffic, %idenlng the Cut, has coIItributt.'.d rnaterlally to a spt',eding'Up of transits. Previously traffic had to be scllt;duled so it woultl move in one direction for several hours. Now it, is possible to move most, traffic continually in both directions, save when a flight. cif locks is cnlt for servicing, or when there has bee» som» tie-up du» to an accident. Clear- Cut, traffic is still given to very large ships and those loaded with flam- rrlabllt.or dangerouscargoes. Otherwise, shipping moves continuously around the clock N bo'tll dirt'ctlons, l!ut pilots havt" to l!e 'areful on nleeting other vesselsin the Cut lest the wake frorll one afft.ct the cour e of othe~. Petlwe Miguel arid Mirallvre~ Lo<.k> Moving south out of Gaillard Cut, a vesselpasses t,hrough the exca- vated vaIley of th» Rio Obispo and Rio Grande, two small streams that flow froLrll the Continental Divide toward the Pacific, At the encl of this valley the vesselreaches the Pedro Miguel I,ocks. This lowers, or raises, a vessel in one chamber 3l feet with the same procedures being used that were described for Gatun. From here a vessel southbound traverses Miraflores I ale, a small artificial body of water, to the two-tiered Miraflores locks. These locks, again uniform in dirnensiorls with the Gatun ajnd Pedro Mi@lel Lock chambers, contain two chambers that lower, orraise a vesselan average of 54 fet t to or frtirII sealevel. This is the final lockage at the Pacific end of the waterway. Pacific. Terminal and ChanneI ta Sea FroDI this 1K!int,a shlp passesthree m lit.sout to BalboaHarbor through a channelsimilar to the approachto t,heGatun Locks on thc' Atlantic side. On the starboar side southbound is the unused channel excavated for the Third Locks in 1941-42. BeyolId Balboa the right-of-way extends five miles to the Pacific QCeanpast NaOS,PeriCo, arid YlarnenCOISland. A Causewayconnects the nIairlland with theseislands cutting off a silt-laden crosscurrent that woukl require continual dredging. Aftt.r a vesselpasses Flamt;nco Island, it discharge»th» Canal pilot gt. W,ill/ CRMULh. Il LR7 il L/UlUL Rfp. W ilU I"LGtt. IA9 p'Ct8H ~l ~ tlTBE Present precautions are bLlllKlclLL tv pl vesselsfrom most mishaps, Occasionally, vessels will scrape the sides of the lockchambers or hit the approachwaOs, Once in a whileserious accidentsoccur, such as groundingsor dentingplates of vesselsby strikingthe approach walls. Cases can be found of claimsand counter- claimsarising from accidents in theCanal. But few accidents have been seriousenough to impedeoperation of theCanal for extendedperiods. Long-RangePlanning to Fxpeditetraffi A lockcanal requires continual attention to maintainits operating efficiency,especially in the tropics. Channels must be dredged. Lock structuresand machinery must be overhauledto reducewear and pre- venttheir becomingfouled with marinegrowths and rust. Towing loco- motivescan break down and wear out. Almostevery mechanical feature 40 MARITIMRCOMMERCE/FUTURE OF THE PANAMACPNAI, subjectto fatigueand obsolescenceand needsregular overhaul and maintenance. As the quantityof shippingtransiting the Canalhas increased fro m a fewthousand vessels a yearto 15,000,serious thought has had to begiven tp waysof handlingincreasing numbers of vesselsin order to maintain optimaltransit time and efficient labor schedules for operators. For the near future, three sets of improvementsare underway tp enhance the Canal's operating efficiency. These include a! lock im provernents, b! navigationimprovements, and c! seekingadditional supphesof water.These @rill be discussedin ChapterFive. Conclusion The openingof the PanamaCanal made possible a tremendous ad. vance in intercoastaland overseastrade. Some of this conceivably would have come irrespective of the Canal. But the presence of the waterway, with its foreshorteningof distanceson principal trade routes, and its speedingof movementbetween the Atlantic and Pacific Oceans, wasa largefactor in stimulatingthe businessthat hasfollowed. The irnprovernentsthat have been made in the Canal to widen the channel, that are now underway to increase the water supply and that, will be made as needed to expedite traffic by increasingthe number of towing locomotives on the lock walls, will enable the Canal to absorb a gooddeal more traffic than it is now handbng. It is estimated that it, can probablykeep up with demandsuntil about the year 2000 or later as transits have been running in recent years. We will consider in a subsequentchapter the possiblemagnitudes of future commerce and what these may do to the need for additional capacity or a largercanal. The United States and other maritime countries will benefit from whatever is done to speed up the process of transiting and to increase the number and size of vessels that can be put through the Canal in a given day and year. Other nations of the American hemisphere,Western Europe, Asia, and Oceania will be servedby whatever advancesthe usefulness of the interoceanic canal. It remains one of the principal means of furthering overseas commerce. CHAPTER TWO FOOTNOTES 1. For the historyof the buildingof the Canal,see Miles P. DuVal, Jr., And the Mountains W'ill Moue, Stanford: Stanford University Press, 1947. 2. Nese are summarizedin an article by the author entitled: "OceanCommerce andthe PanamaCanal." Jourrlai of MaritimeLax andCornrnerce, Vol. 4, No. AP«i >973, pp 397-423. Much of what followsis extractedirorn the Jouraolwith the permissionof the Editor. The lawsand regulations are incorporatedinto the Codeof Federal«R~« tions,Title 35, PanamaCanal. Washington: Office of FederalRegister, re»s d of what activitiesin the CanalZone should be included within the coverage of tollsis "not appropriatefor judicialaction" 56 U.S.309, 317 958!!. 7. CFR, 35, Sec. 133.32. S. CFR, 35, Sec. 133.71. TheRegulations specify that, except as provided, "no vessel shall pass through the Canalor enter or leavea terminalport, or maneuverwithin CanalZone MARlTIMKCOMMERCE/FUTURE OF THE PANAMACANAL 42 waterslying inside the Canal entrances without having a PanamaCanal pilot o board,"The pilothas full controlof navigationuntil the vesselleaves opp it t ~md for the ~a, unlemothe~~ releasedby thePort Captain CFR, 35, Sec.105.1. Thepower to pbicearmed guards aboard vessels was first givenby Actof June 10. 15,1917 0 Stat.220!. This was amplified byan Errecutive Order of Septem ber5, 1939,and by Acts of August5 andSeptember 26, 1950 4 Stat427 and64 Stat.1038!. See Vnited States Code, Title 50,Sec. 191, 11. NormanJ, Padelford,The PanamaCanal in Peaceand @Tan New gorQ Ma millan, 1942, ChapterIV. 12, CFR,35, Secs. 105, 107. Canal pilots have similar control of thempvement of all vesselsof war in the Canal, 13. CFR, 35, Sec.103.9. 14. SeeCFR, 35, Sec.103.8, giving Canal authorities discretion in thesematters Marine Director's Notice to Shipping Agents, August 12-72. Ba!boaHeights C.Z.,May 19, 1972,p. 4. Themaximum draft levelallowed for transitsis 39 feet,6 inches;for initial transits it is37 feet.Ibid. 16. CFR, 35, Sec. 111.162. %e are indebted to CaptainHoward L. Wentworth,Searsport, Maine, for 20 17, yearsa pilotat theCanal without an accident or investigation,for observations onproblems of navigatingthe Canal. CHAPTER THREE L}SE OF CANAL BY OCEAN SH1PPING Standingat Gatun at the Atlantic end of the PanamaCanal, or at balboaat the Pacificterminal, lines of vesselscoming from all partsof the world can.often be seenmoving toward the Canal,or waitingtheir turnto proceedinto it. On the average,as many as 40 vesselsa day transitthe Canal.More than 14,000ships a yearare locked through the waterwayat the presenttime, This exceedsthe dreamsof thosewho f~t visualizeda shipwaythrough the Isthmusof Panamaand vindicates the need for a shortcut between the oceans. Thedesigners of the Canallooked far intothe futurewhen drawing up the specificationsfor the waterway.The builders constructed a systemof locksto endure for a centuryand more, As it turnedout, the workwas done on a scaleof sufficientproportions to serveall but the largestships afloat today. Vesselstoday are far longer,of widerbeam, and more specialized in naturethan whenthe Canal was built. Increasingnumbers of thosethat nowregularly call at the Canalpractically fill the 1,000-foot-long, 110-foot-widechambers. The standardship designers' measure known as"Panamax," meaning the maximum dimensions a vessel can have to fit withinthe locks, is being exceeded each year with new ships that are toolarge to goin thelock chambers. Such vessels areemployed on oceanroutes that would not normally pass through the Canal,such as fromthe MiddleEast to Europeor Japancarrying crude oil. Their existenceraises questions, nevertheless, whether a largerwaterway shouldone day be constructed to accommodate them. Shipsthat Passin the Dayand Night The small,plodding, coal-burning freighters and othersteamships that oncepassed through the PanamaCanal are now replaced by 850-foottankers hauling 60,000 tons of oil, andby mammothcon- tainershipsthatcan sustain a speedof30 knots and more at sea loaded Shiptraffic at theCanal has reflected the technological progress of oceantransportation from the coal-burning reciprocating steam engine erato the gas turbine and nuclear power plant. The vessels that transit theCanal have ranged from windjammers of the days of sail and small Pleasurecraft to theU.S.$. Missouri, the "Mighty Mo" of World War II fame, with a beam of 108 feet. Particularlyinteresting among today's transients are the 950-foot, 106-foot-beancontainerships of the T,S,S. Tokyo Bay and sisterships class of British registry and other new slrips of a sim,l~ iz, th carry 2,000 containers or more It Patternsof Ship Traffic The recordsof Canaltraffic show a remarkablysteady growth in business,both in numbersof vesselspassing through, and in cargocar- ried. Transitsof total oceantraffic haverisen from a fewthousand to 14,829in 1970.The high point for totalPanama Canal traffic of all kindswas reached in 1970when 15,523 vessels made the transit. The volumeof cargotransported through the waterway has grown from 46 MARITIME COMMERCE/FUTUREOF THE PANAMACANAL nine milhon tons in 192G to 127 million in 1973, Toll receiptshave n proportionately,surpassing $113 million in 1973. Q>res~g a9 the historicalrecord shown in Table 1, the traffic patternssince ].947 are of most concern, Table i Historical Traf fi c S tati sti cs" Total Tolls and Fiscal Commercial Ocean Commercial Ocean Total Tolls Credit Year Transits Car o Lon Tons Transits Receiveg~a 1915 1,058 4,888,400 1,108 S 4,367,60> 1916 724 3,093, 335 807 2,407,047 1917 1,738 7,054,720 1,937 5,628,069 1918 1.,989 7,525,768 2,210 6, 439,066 1919 1,948 6 910,097 2 230 6 173,029 9 ,3 7 7 1 1921 2,791 11,595.971 3,371 11, 276,483 1922 2,665 10,882,607 3,050 11,198,000 1923 3,908 19,566,429 4,449 17,508,701 1924 5,158 26 993,l67 5 787 24i291 596 4, 9 3,956 549 5,174 ,40, 4 1 1926 5,097 26,630,016 5,923 22,931,764 1927 5,293 27,733,555 6,259 24,230,027 1928 6,253 29,615,651 7,116 26,945,862 1929 6 299 30,647,768 7 197 27,128,893 193 27 0,0 6, 1931 5,370 25,065.283 6,217 24, 646,109 1932 4,362 19,798,986 5,075 20,707,856 1933 4,162 18,161,165 5,040 19,621,181 1934 5,234 24 704,009 6,211 24,065,707 1935 5,180 25,309,5 7 6, 369 23,339,2 9 1936 5.382 26,505,943 6,453 23,510,629 1937 5,397 28,108,375 6,695 23, 147,640 1938 5,524 27,385,924 6,930 23,215,209 1939 5,903 27,866,627 7,479 23 699,430 7 I t 1941 4,727 24,950,791 6,623 18,19G,390 1942 2,698 13,607,444 4,643 9,772,113 1943 1,822 10,599,966 4,372 7,368,739 1944 1,562 7,003,487 5,130 5,473 846 PAY 3 8,6 3,6 8,8 1 l946 3,747 14,977,940 9,586 14,796,406 1947 4,2eo 21,670.518 6,375 17, 634,361 1949 4,679 24,117,788 6,999 20,017,439 1949 4 r793 25,305,158 7,361 20.617>635 950 r448 8,872,243 7, 94 24,511 713 1951 593 3o,O73,o22 7,751 23,958,979 l952 6,524 33,610,509 9, l69 3p,409,500 1953 7,41O 36 095 344 10,210 37,530, 327 1954 7,794 39,095 067 10,218 37,191,107 ,9 0, 1 36, 1956 8,209 45,119,042 9,744 37 450,759 1957 8,579 49,702,200 10,169 39,653,712 1959 9,187 48,124,809 10,608 42,834,005 1959 9,719 51 153,096 11 192 46, 546,620 fron~csuse intermittent nuctuatrons. me urss s~siunisia~ occurredin 1972, although this involved a drop of only254 transits out of more than 14,000, or lessthan two percent. Therecord shows that the Canalhas beenof largeand continuing importanceto commercialshipping. This is theCanal's largest cus- tomer.This, furthermore, isa businessthatis worldwide inscope, encom- passingvessels from as many as 60 different countries ina singleyear. CX 0 C> CO C> CV Q CO o O O O O O QO O O O0 0 O Vl USE BY OCEAN SHIPPlNG 49 Government Traffic The top line in Figure13 showsthat therehas been a considerable variationin the overallnumber of transitscompared with commercial oceantraffic. This is explained by the varyingnumbers of government- ownedvessels and smaHcommercial craft that use the Canal.The gov- ernrnentvessels warships, military transports, tankers, etc.~ largely United States Governmentshipping. This classof traffic hasranged from as few as 182 transitsirl a year to 1,504, asshown in Table 2. Table 2 U.s. Government Ocean Traffic at Panama Canal* Fiscal Year No. Transits Lon Tons Car o Tolls 1948 508 l,520,569 $1,755,134 1949 658 2,217,495 2 405,519 1950 443 1,429,283 1,918,785 1.9 51 693 1,165,986 2,764,747 1952 774 3,237,311 3,383,900 1953 1 i 064 5,049,922 5,526,038 1954 800 2,705,380 3,862,015 1955 296 838,305 1,190, 367 1956 266 1,150,121 1,215,883 1957 269 922,173 1, 117,467 1958 279 791, 310 9 I2, 110 1959 204 1,012 842 965,643 1960 182 804,581 818, 313 1961 188 1,149,934 997, 842 1962 191 1,126.418 1,028, 396 1963 300 1,115,352 1, 460, 281 1964 285 1,177,269 1, 395, 548 1965 284 1,923,538 1,647, 653 1966 591 3,220,190 3,446,219 1967 879 6,147,479 5,484,566 1968 1, 504 8,491,221 9,206,815 1969 1, 376 7,210,068 8,418,421 1970 1, 068 4,410,451 6,218,541 1971 503 2,2 36,619 3,144,376 1972 413 1,742, 30 3 2,651,281 1973 373 1,405, 428 2,285,727 1974 248 1, 743,963 1, 831, 561 *Compi led from Panama C'anal ComPany, yearly, Table 11. Thisgroup af shippingwhich formsthe secondranking element of trafficchanges in its compositionand numbers as crises appear abroad and the need is felt for reinforcingUnited Statesinterests and security. From Table 2 it will be seen that United States Government traffic movedto peaksin the 1951-1954and 1966-1971periods. This was occasionedfirst by military buildupsin the Korea-Taiwanarea, and later during the war in Southeast Asia. Althoughthe extentof governmenttraffic is smaH compared to com- MARfflMF. OMMRR 'F;/F't'Tt'fiK iF THF: PANAMA r ANAL thermal ocean ahipping, the coritiriur~! flow of an average of 300 transits 4 y88f helps explain Lhe attitude of indrspensahihty held hy the United Shat' Qovetriment toward the existence ariij rlefens ~ af the iriter. ocean@ artery. lt ia eloaely id«ntrfied with the rir~irrity of United States 4 teceata. Theta ia a fairly eorMrtanttraffic of aliproxrrnately 90 Long Tons 1955 1960 1965 1970 197 3 Cargo 19Vg Algeria 1 Argentina 15 8 43,380 Australia 2 13 143,508 Belgium 15 11 49 131 147 658,708 Braz l 1 10 2 3 22 35 126,969 Bulgaria 2 5 Canada 12 16 6,855 Chile 60 107 ll5 118 115 3,643,981 China, Peopl es Rep. 17 Colombia 198 269 246 214 229 442,577 Costa Rica 31 4 20 16,256 Cuba 17 75 78 774,119 Cyprus 74 198 1,316,803 Czechoslovaki 2 Denmark 323 447 283 434 363 2,269,935 Dominican Rep ublic 6 1,727 Germany, Fed. Rep . 375 1,296 1,186 1 , l08 789 4, 793 <020 Germany, Peop les Rep. 17 35 42,578 Ecuador 57 62 25 66 64 342,609 El Salvador E'thiopia 6 1 Finland 9 15 27 66 38 189,889 Prance 132 167 172 247 209 926,477 Ghana l. 2 Greece 12l 273 575 568 1,071 12,572,638 !!onduras 428 204 268 166 99 96,639 Iceland 2 9 Ind ia 8 38 47 609,455 Haiti 1 Indonesia 2 Iran 2 7 74,123 Ireland 1 12 29 21 378,798 Israel 3 62 59 83 40 183,65l Italy 160 194 192 266 266 1,394,314 Japan 464 820 804 1 , 178 1,331 12, 166,721 Kuwait t 2 3 9 88,497 Lebanon 34 14 5 4,079 Liberia 384 997 1,118 l ,601 1,685 25,937,307 Malaysia 6 156<504 Malta Mexico l.8 42 69 53 277,80l Morocco 1 3 16,045 Nauru 1 Nether lands l39 416 618 493 449 2,824,262 New Zealand 1 1 19 Nicaragua 50 77 62 34 80 140 613 Norway 904 1,167 1,446 1 ,323 1,190 15 991 479 Pakistan 18 139, 786 Panama 55l 255 518 799 959 6,629, 420 Paraguay 1 Peru 18 83 153 180 158 1,358,499 Phzlippznes 17 20 84 112 97 638,508 Poland 28 29 155,680 Portugal 1 4 Rep. China T aiwan! 54 103 147 180 1,896,673 52 1, 141, 114 1,360,631 l,696,886 1,787,311 Italy 761,236 4, 2 75, 4 3'5 4,377, 156 8,833,601 12,854,722 Japan 2,299,506 4,897,699 8,235,514 15,970,573 17.192r046 I.aber ia l,610,828 ! 686 a ZBZ Zd236d989 2,732,796 2,780,935 Ne 'Lage I I c%.gds 6 35,9 89 6,296,688 9,588,919 11.741,25012. B68.178 ."orway 3,783,372 1,9l2,766 3,536, Z18 5,00 3,800 Pen Jgtla 1,872,618 8}4,978 I, 373, 825 2, 308,225 3 ~340,520 4,07 !,202 Sweden 856,548 8,291,824 11,709,292 12,7092,959 L'n xt e t! 'Kd. n 9d OIn 5,927,758 7,730,999 9,795,713 L~nl te d state s 10,407,307li,i14,567 10,724,35110,288,505 4,200,274 4,614,242 5,599, 582 6,092rlD99 4'est'C t Get rngany d f o p 1,092,498c* t r.opa y, don~ahft orta .'or d»g ~t d ye *, T It tt. 53 Al SL IShlVHL Under the Merchant ivLarlne wet vx~vlu elrecLwu uy ~i~~- ~iaav StatesCongress in that yearthe Government is undertakingto revitalize merchantshipping through constructing 30 newstandardized transports a yearfor the nextten years, It is at thesame time supporting can- structionand operationalsubsidies for special-purposevessels in order to assureU.S.-flag service on overseasroutes deemed essential to the nations interest. Drives mounted by the Departmentof Commerceto increaseex- ports,and hy theDepartment of theTreasury to helpredress the bal- anceof paymentsthrough devaluing the dollar, gave an advantage in the internationalmarkets to United Statesexports in 1972-1973,resulting in a favorable balance of trade, With the fresh lease on !ife which thesepolicies imparted to overseas commcrce,the UnitedStates merchant fleet should in timehe able to reversethe 20-yeartrend seen in Figure14. Complementing these ef- fortsby theGovernment are steps taken by someprivate enterprise to wintrade by puttingfast, highly-competitive ships built in foreignyards on the seasto rival the bestothers have there Sea-LandLines' speed- record-holdingcontainerships on the Atlanticand the Pacific are a ~ass in point.Although some of thesevessels only occasionally transit t.hc Canal,they are earning business forthe United States that can redound to theadvantage of U.S.oceanborne commerce generally. American-Owned Ships under Foreign Flags Severalhundred vessels built in the UnitedStates have been placed underforeign registry flying the flagsof Liberia,FIonduras, Panama, C X A CCI Ul O W % O Traffic by Types of Vessels An examinationof traffic statisticscovering the past20 yearsshows that there hasbeen a decidedfall in transitsby passengerships and by generalcargo vessels. At thesame time there has been a sharpupswing in transitsby dry bulk carriersand a notablegrowth of containership transits since 1970. Thesetrends are illustratedby Figure15 and tabulatedin Table6. Table7 givestonnage figures for the most recentsix years. Passenger Ship Traffic The fall-off in passengership business corresponds with the general shrinkagethat has been taking place in oceanpassenger travel as the longAistancejet planes have been supplanting the ocean liners nearly everywhere.The closing out of theGrace Lines' passenger service be- tweenthe United Statesand the WestCoast of Latin Americaled to a Text continues on page 61.! o CV Sl ~SNVHl 30 838AflN 0 Ch EX> r ch M g CO O f O P1 Ch 4 CO 0 Jl Z Ul CD LA tA Ct' Vl CD Ch 0 z 0 '0 all JJ 8 ev A M Ch Vl Pl 0 4 g ig 4J 0 0 0 z th 'tF P1 C O Ch w rU hl o C4 4 0 V 4 0 8 C sl D eN CV O hi O P1 CO W 4 0 4 th g 0 0 0 0 G t0 E 0 U N R 0 0 0 0 ~t0 +u! C U th th F 0 th 0 4 8 W V 0 g 4 cn Q 0 -a 0 N QJ '4 fg m Q U! e trQ G U 0 'J 5 Q a W LG m Q g rg J Q a. z F P Caa C Pal r C7 CO o VlC an CO Pal CO CF na CV rtl aP PaI aQ C3 CH Cal an C! in CO CO CO CD CD nl IPI I/1 all aQ CO CO C0 Ch MC7 f Vl C3 CO C> M Ql Vl Ct O CQ aPI CCI an an C IA CO aCl C7 CD M CD an f CV r M 'cà da CO C! aA Cal Ct PCOdl O r CO jl Oa an CO e Ch CO an Cal C! C! C> C> all 0 CfI U 4C 40 0 ga '0I Ilj Ig 4J C3 4 OJ 4 IQ C 0 4 hasshown no appreciab!egain since 1965. T~eevelopme~~w fieldsin Ecuador,Peru and the Upper Amazon basin may add to traffic 62 MARITIME COMMERCE FUTURE OF THE PANAMA CANAL levels as crude oil from these locations moves to the large refineries in the Caribbean Aruba, the Virgin Islands, and the Bahamas. For the near future, the outlook is for gradually declining traffic as the older fields become exhausted, barring exceptional new discoveries. General Cargo Traffic It will be observed from Table 6 that general cargo shipping has over the years supplied the backbone of Canal traffic so far as numbers of transits go. This still provides the main number of transits, although a noticeable decline in numbers of these ships calling at the Canal has set in since 1965, dropping by nearly one-half. This drop-off has been compensated for by corresponding sharp increases in the numbers of transits by bulk carriers OBO ships!, containerships, refrigerated cargo .ships, and tankers,- many of which are of larger size and carrying capacity. The combination of general cargo shipping, bulk carriers, tankers, and containerships seems likely to handle the greater part of the cargo moving through the Canal for the next decade at least. Table 8 shows the tonnages of cargo and the percentages of each carried through the Canal in 1973. Table 8 Car o Movement b Tonnages and Percenta es Carried b Varyin Classes of Shi pin , 1973* Cargo T e of Vessel Tonna e Carried long tons! Bulk Carriers 61,354,000 48 .7 General Cargo Vessels 31,279,000 24 .8 Tankers 23,372,000 18 .5 ~ .o~n nrn,, A 7 I Rerrg . aged. ~ QT tj P: 3, 2-5 1 ~, Mi.see llaneou:=- --. 9l8', 0 100.0 Total 126,104, zany. «Data supplied by Panama Canal C of bulk cargoes, both Within the next decade increasing quant: competition by supercar- liquid and dry, may be siphoned off throug l terminals and landing riers operating on all-ocean routes as deeps and abroad where they facilities are made available in the United St Ision, however, for the do not now exist. This is not a foregone co USE BY OCEAN SHIPPlNG world energycrisis could work to the advantageof shippingthat can utilize the PanamaCanal with the savingsin oceandistances which this makespossible. There will be businessfor the generalcargo vessels so long as there are small ports shipping and receiving freight, and limited quantities of goods to be carried from one country and port to another see fig. 16!. Current Trends in Canal Traffic Contemporary Slowing of Traffic Growth Turning to the general profile of Canal traffic, it is noticeable that there has been a leveling of transits taking place since 1968. The num- ber of transits has slowed to a zero growth position, as shown in Table 9. The questionis whether this is a temporarysituation or is likely to continue for some time. Table 9 Panama Canal Ocean Transits, 1965 1974* 1965 12,203 1970 14,829 1966 12, 601 1971 14,617 1967 13,385 1972 14,238 1968 14,807 1973 14,238 1969 14,602 19 74 14, 304 *Prepared' from Panama Canal Company, Annual Reports, Table 11. Several factors have been contributing to this situation. These in- clude an increasing size, tonnage, and specialization of vessels.Political and economic forces, such as fluctuations in monetary exchanges, shortages of fuels, and labor problems along the waterfront, have also played a part. Increasing Size and Tonnage of Vessels Transiting Canal The sizes of vessels appearing at the Canal for transit have been increasing with the years. The averagesize of oceangoingcommercial vesselshas risen from 5,910 PanamaCanal net tons in 1964 to 9,100 tons in 1973. As shown in Table 10, shipping flying the flags of several maritime states has more than doubled in average gross registered ton- nage since 1955. Others have increasedby somewhat less. Among the principal user states the average tonnage of transiting vessels is now 10,517 registered gross tons. If the averagetonnage of vesselsflying the flags of the eight largest usersare plotted on a graph, as in Figure 17, it will be seen that a generally similar pattern of growth has been taking Text continues on page 67.! /, Table 10 @vera e Re xstered Gross Tonna e Transitin Vessels of Princi pal User States~ 196! 1970 l973 Flag 1955 1960 3, 104 8,271 6,144 6,211 7,657 Heigz urn 9,271 14, 148 7,239 8,218 7,846 C!rile 9 886 11 l37 Clr ina, z t 1 . Rep. 6,960 5,780 8,267 'ra i wan ! 4,264 r,204 5, 41.5 Co lorry>i a 3,0'! 3 3,698 7,724 6,290 9,650 Derrrrrark 4, 7RG '>, 039 7 23 6, 946 7,642 France 7, 014 8,672 5,965 10,410 Germany, Fed. Rep. 3, 314 4,209 4,618 9,673 11,645 11,017 Greece 6, 760 8,740 1,986 2,559 4,933 !rorrciuras 2,986 4,206 10,795 9,796 10,445 italy 7,410 8,511 8,149 11,251 13,629 Japan 7,423 7,982 11,067 14, 369 14,541 Lil>erma 6,470 7,919 8,460 8,109 ~'etherlands 7,247 7,160 5,751 9,751 8,469 14,926 «orway 5,774 8,023 5,659 6,671 7,527 P a f lama 5,447 5,269 5,242 7,184 9, 360 Peru 4,166 4,711 9,253 10,460 14, 311 Sweeien 5,880 7,847 10,792 13,569 Un x teh Kinejdorr 7,822 8,741 9,660 9,282 9,103 10, 392 tins teel States 7,595 8,146 *Compi led f rom Panama Canal Comparry, Table. 17. Table 1 l Incr easin Beamsof Vessels Transi tin Canal Vessels 80-Foot bearrr percent of Total Ocean Transits F fiscal Year and Over 12. 3 1969 1,795 l2.7 1970 1,877 13. 5 1971 1,980 17. 0 1972 -', 428 22. 5 197 l 3,204 '1 rigor's ~r,rtnereer f rurr Surr."ar y COWentSirr PanamaCanal COmpany, ~rirlLlil 8< |. ort ~, Cnapter1 . ] he aver~ SNOi SSOHB 39vH3/0 USEBY OCEANSltIPPING Cor>tinuedfn>v> Page 63.! placesince 1960, albeit with considerable variations between countries Thegrowing size of shippingisalso attested by the number ofvessels havingbeams of 80-feetand over that are transiting the Canal, asnoted in Table 11. As vesselsincrease in size,they areof courseable to carrymore cargo,as well as to reducethe number of tripsneeded tocarry given amountsof cargoin a year.!tis notablethat the cargo volume trans- portedthrough the Can@ hasgrown 17 percent since 196', while the numberof transitshas remained virtually stationary. Solong as the size of shipscontinues to grow in stepwith cargo growth, the number of transitsa yearcan be expected to remaingenerally constant. Governmentpolicy to expandexports and to enlargeoverseas trade shouldproduce further growth in trafficover the long run, but will requiretime to do this. GrowingSpecialization of Vessels Contributingto the leveling of transits isthe improved efficiency in cargo-carryingofmany of thenew ships designed tohandle specific commodities.Moderq ships one-fourth larger in sizecan carry up to a thirdmore cargo of a particularkind than the older general purpose cargovessels. In1963, 1.13 long tons of cargo txansited theCanal for eachnet laden ton of shipcargo capacity. In 1973 this ratio had in- creasedto 1.31 long tons of cargo for each net ton of capacity, indi- catingan improved efficiency in the use of shipcargo space Whilevessels have been becoming more specialized, andlarger, total cargohas been rising atthe same time. In 1969, 10S.7 million long tons ofcargo passed through theCanal in14,602 transits. Cargo volume rose to 111.0million long tons in 19'72 with 14,238 transits. In1973 the cargoload went up to 127.5 million long tons. This was carried inthe sameTwenty-two number of milliontransits. more long tons of cargo were carried in1973 thanin 1968 in 600 fewer transits with no significant difference inthe ratioof ballastto laden transits. This speaks tothe improved useof spacebymore specialized shipping andhe}ps explain theleveling off thathas been occurring inCanal transits. The trend toward specializa- tion is expected to continue. RiseTheof Containershiprise of containership Traffic trafficis a strikingfeature ofcontemporary oceanbornecommerce. In 1973, 5,9 million long tons of container cargowent through theCanal in702 containership transits.This was up from2.5 million long tons in 355 containership transitsin 1972, and a mereShipment256,788 hytonscontainerships in 1969in 61 insurescontainership safer arrivalstransits. ofcargo. Atthe "UCO g C CQ LPJ CQ g > o 0 U Q, C> a,O u CPA ~Sk, USV BY OCEAN ~W Can ta inc r shi~a Ordered* : hips ordered in 1970: 2 >5 With BpBCitp Of 241,116 20-f t baxes IP n ~ 4 1971: 95 66,741 I ~ H 1972: 33 If 25,669 II ~ 92 11 'I'I 1973: 39,7l6 *No on Order, guar terry. Manyports do not yet havecostly loa lingequipment, ad quate st,oragespace, and close-in transportat.ion links neede to l handlelarg» quantitiesof cOntainerS effiCiently. ThiS Will be cOrreCted in tilne. Tradereports suggest that, upwards of 40percent of generalcargo is potentiallycolltainerizable. Development ofsuitable port. facilities re- quireshath time and large investments of capital. As the faciliti are>s expandeadded i, use of containershipments willfollow and broken lot shipmentswill decline.KVith a risein demand,increased calls will be madefor additionalcontainership service. The effect. of thiswill l>eall inflowof ordersfor morebottoms. The outlook for contiliuedand eXpandedcontainership buSineSS at the Canal iSgOad fOr the comiilg iecade. lrr~pa .tof SuperCarriersOri Canal Den1and Nearly'.1,000 large bulk carriers, ranging fn>m 100,000 to 500,000 deadweight,tonseach, have been constructed in world shipbuilding yardssince 196r. These are designed totransport large quantities of liquidand dry hulk cargoes over long- listanceoceanroutes atlow unit costMany fig. of 18l. thesuperships have been built to carryMiddle Eastern, ~orthAfrican, and Nigerian oil to Europe,Japan, arid North America, alongwith lndanesiarl oilto th» A%est Coast ofthe United States and Japan.Other carriers have been constructed forcarrying ores, coal, and grain.Depth limitations in ports, especially of the United States, are hamperinguse af thesecarriers for UnitedStates oceanborne com- merce.When these limitations are removed, it is reasonableto expect thatsome of the big ships will enter into competition forthe carriage of bulkcargoes now carried through the Canal insmaller craft. Accordingto testimony given hy Governar David S. Parker to the HouseSubcommittee onPanama Canal, there are approxiniately 1,000 MAR~TIMECOMMERCE/FUTURE OF THE PANAMA CANAL. 70 corn1nercialvessels too largeto transitthe PanamaCanal at this time Extrapolatingfrom past trends, and considering thenumber of vessels pw on order " it, is possiblethere may be as many as 1,850 comrner. cial vess.lstoo largeto passthrough the Canalby the year 1975.12 With the physicallimitations of the lock chambers,the Canalcan nominallyaccept vessels of no morethan 975-footlength, 1069 foot beam,39.5-foot draft, and carryingno morethan about 65,0pplong tons of cargo. The economiesof scale which the supershipscan offer for low-unit. value bulk commodities, combined with automation, small crewing re- quirements,and lowertransportation costs, will makeemployment of the very large carriersattractive to some businessesin place of the smaller ships that can go through the Canal. One of their virtues is that a singlesupership can do the haulingof severalsmaller carriers with as rapid turn-around time in port. Only a sea-levelwaterway can handle vesselsof 150,000 to 250,000 deadweight tons. If the interoceanic link is to be expanded to transit vesselsof this size, this will require investing $3 to $5 billion or more, in addition to treaty payments The cast for a sea-level canal may be no more than the outlays needed for constructing and manning two naval attack aircraft carriers of latest design. Nevertheless,the amounts involved will have to be weighedin comparison with other demands upon the public purse and the use that is likely to be made of the larger waterway. Circumstances may warrant an expenditure of the magnitude of $3-5 billion. The public will want assurancesif this is called for that such a waterway will generate additional traffic to justify the expense. This may be difficult to establish far in advance. Depending upon the size of the ships that might be employed, the quantities of liquid bulk cargoesto be transported at the time, and the storage capacities that may then be available at refineries and in ports, supertankers could theoretically transport through the Canal the 23 million long tons of oil that passedthe Canal in 1973 in less than 100 transits in place of the 1,729 transits of 1973 while reaping economies of' scale. Similarly, the 58 million long tons bulk cargoestransported through the Canal in the same year in 3,059 transits could theoretically be carried in 230,000 dwt supershipsin only 250 transits. Although the tonnage of cargo passedwould be as large, some persons might view the lower numbers of transits as hardly justifying construction of such an expensive new public work. The tonnage is the statistic of interest. Despite the trend toward construction of very large bulk carriers, most ships in the world merchant marine today, and particularly those of the United States,are able to transit the existing interoceanic Canal. USE BY OCEAN SHIPPING 71 Furthermore,the majority of new U.S.-flagships being built under the Merchant Marine Act of 1970 will be able to transit the lock Canal, Dry cargoships built to a configurationwhich will allowthem to gothrough the Canalrun around80,000 tons,so far asAmerican-flag ships go, lt is the very largecrude oil tankers,200,000 tons and more,that will not be able to get through the presentCanal orany future tock-typecanal, aspresently foreseen. ' %e have looked for a relationshipbetween expansion of the number of supershipsand potential Canal demand. Instead, there is a significant geographicand commodityrelationship. The presentphysical con- straintsof terminalsand port facilities,as well astight, supplies of fuel, pointto restrictionson the use of thesuperships for some time to come in trades that compete with the Canal route. The Cost of Transiting the Canal In figuringwhether it is economicallyadvantageous to route a vessel throughthe Canal,toll chargesare a factorthat mustbe takeninto consideration. It is figuredthat under normal conditions, if the cost of operatinga vesselis 20 centsper PanamaCanal net ton a day,a variantwith differentsize vessels, the cost of tollson ships that are laden is approxi- matelyequivalent to four and one-half days' operation atsea. If a vessel cansave this many days on its voyage,it is profitableto usethe Canal ratherthan anotherroute if oneis available.A vesselin ballastcan profitby using the Canal if it savesthree and three-fifths days in reach- ingits destination.These estimates donot take into account all the commercialadvantages of the time saved. Conclusion ThePanama Canal has aided a largeadvance in overseastrade. By foreshorteningdistances onprincipal trade routes, it has been a factor in stimulating oceanborne commerce. Thegrowth of shiptraffic and cargo movement in the past 60 years suggeststhat a furtherexpansion of trade through the interoceanic waterwayisconceivable. There are potentialities of further growth, as weshall suggest in thenext chapter.' Withtechnology spurring new uses of materialsand methods of pro- duction,and with worldwide demands for goodscontinuing to rise, opportunitiesexistfor furthergrowth of commerce.Whatever stimu- latesthese trends will inducefurther growth of trafficat the Canal. Aswe shall see in Chapter Five, there are finite limits to the physical capacityof the existing Canal interms not only of the size of vessels thatcan be passed, but also in thenumber of vesselsthat can be transited in a given year. 72 MARITIME COMMERCE/FUTURE OF THE PANAMA CANAL CHAPTE R THAf f FOOTNOTES 1. For traffic figures,see Panama Canal Company, Annual Reports, Tah]e 11 2. Panama Canal Company, Annual Report, 1973, Table 13. 3, Shipping and Canal Operations,Hearing before the Subcommittee on p~~ama Canalof the Committee on Merchant,Marine and Fisheries Houseof Represen tatives, 93rd Congress, 1st Session, July 17, 1973, Ser. No. 93-19, pp. 4 The statement takes account of traffic that is both going to and coming from the user states. Percent of Selected Countries' Oceanborne Commerce PassingThrough Panama Canal Australia 3. 3% El Salvador 66.4% New Zealand 15,7% Canada 6.8% Ger. Fed. Rep. 2.9% Nicaragua 76.8% Chile 34.3% Guatemala 30.9% Panama 29.4% Colombia 32.5% Japan 10.7% Peru 4 1.3% Costa Rica 27,2% Mexico 16.6% United Kingdom 1.6% Ecuador 51.4% Netherlands 1.5% United States 16,8% Venez u el a 7.4% 4 Public5 Law 91-469. 91st Congress, 1st Session. 84 Stat 1018, See U.S. Department of Commerce,Annual Report of Maritime Administra- tion, 1972, p. iv. See Ship Transfers to Foreign Fhg. Hearings before Merchant Marine and FisheriesSubcommittee of Committeeon Interstateand ForeignCommerce. United StatesSenate. 85th Congress,1st Session,on S. 1488 957!. Seealso C.J. Colombos, The International Law of the Sea. 4th ed,, London, 1959; BoleslawA. Boczek,Flags of Conuenience:An 1nternationalLegal Study. Cambridge: HarvardUniversity Press,1962, especially Chapters 1, 2, 7. Infor- 6mation on intent7 to register a vesselunder a Panlibhon arrangement is often filed with the United States Maritime Administration by the owners of the vessel. A total of 467 vesselsheld by foreignaffiliates of United Statesincorporated companieswere listed as being registeredin 19 foreign countries on December 30, 1970. SeeDepartment of Commerce,Maritime Adminirtration, Foreign FlagShr'ps Owned by UnitedStates Parent Companies, Washington, 1971, No, MAR-560-2 2. 8 Panama9 Canal Company, Annual Reports, Table 14. "The MaritimeContainer Industry, 1972-1975,"Published by Flexi-Van,Inc., NewYork. Seehfaritirne Reports and Engineering News, May 1, 1973,p. 22. 10 We S.S.VENPFT, built for the Gulf Oil Corporation'scrude oil carryingfleet in 1973, 325,645dwt tons, is, for example,1,115 feet long, 175 feet wide, and draws80 feet9.5 inches when fully loaded.The Orange Disk, Sept..Oct.1973, p. 33. 11 128,7million dwt tonsof tankers,combination carriers, and dry bulk carriers were on order for delivery in 1974.When completed, these will provide a 50 percent increasein the lifting capacity for oceanliquid and dry bulk trades. H.P.Drewry ShippingConsultants!, Lld Shipping Statistics and Economics, No, l '5,January 1972, pp. 18, 26, 44. USE BY OCEAN SHIPPING 73 Ig Communication to aut,hor from Acting Chief, Executive PianningStaff, Pan- ama Canal Company. Seetestimony of Alfred Maskin,American Maritime Association.in Hearing before Subcommittee on Panama Canal of Committee on Merchant Marine and Fisheries, House of Representatives,93rd Congress,1st session.Shipping and Canal Operations, Serial No. 93-19. 5'ashington,July l 7, t 973, pp. 62-63. 14 See also Atlantic-Pacific Interoceanic Canal Study Commission,Interoceanic Canal Studies, 1970, Appendix IV, p. IV-55, and studies reported in this section on Interoceanic and Intercoastal Shipping. Table 1 Car o Movement On Princi al Panama Canal Trade Routes~ t ousan s o on@ tons Current Rank No. Route l974 1973 1970 1965 1960 1950 E.C. United States- 59,005 51,723 49,663 22,540 14,061 4,209 Asia E.C. United States 8,614 7,877 8,619 7,824 8,147 4,615 W.C. South America Europe Asia 7,80l 5,672 8,853 215 245 70 w.C. United States 6,413 6,397 4,899 3 r 293 3,590 1 ~ 02l Europe Europe - W.C. Canada 5,225 3, 866 4,117 3,589 3,140 1,705 Europe W.C. South 4,729 4.748 5,943 7.163 4.584 3,545 Amer ica W.C. United States 4 r 566 2 r 742 2 r 903 2 r 839 2 r 624 210 E.C. South Ameri.ca W.C. South America- 4,506 3,423 4,223 1,983 1,115 116 E.C. South America United States Inter- 4,418 3,942 3,707 5,198 6.782 7,376 coastal 10 E.C. United States 4,046 2,760 1,882 1,220 747 634 W.C. Canada Asia E.C. South 3,982 2,154 1,950 1,849 549 12 Amer i ca 12 E.C. United States 3,536 2,943 2,222 2,435 1,057 790 Oceania 13 Europe Oceania 3. 364 3,226 2r 817 2, 379 2,082 1, 718 14 Caribbean West Indies! 3,019 2,882 2,859 1,586 696 85 Asia west Indies - W.C. 2,766 2,521 2,825 1,910 797 349 United States Asia E.C. Canada 2. 436 2, 154 1,690 739 317 28 17 W.C. Central America 2.181 1,962 1,347 945 549 437 E.C. United States 18 E.C. South America- 1,840 2,225 1,347 1,006 283 W.C. Central America West Indies W.C. 872 1, 257 1,377 303 436 1l8 Central America Goods exported from the United States, and destined to it, comprise a large part of the trade moving on 9 of the 19 principal trade routes. The importance of the Canal to this commerce lies in the fact that it otherwise would have to take longer or more expensive routes to reach its destinations. As a percentage of a nation's overseas trade, Canal cargo composes widely varying proportions. Thus, 41 percent of Peru's overseascorn- merce passedthrough the Canal going one way or the other in 1973, while 29 percent of Panama'sforeign trade moved through the Canal in the same year. For the United States, 17 percent of its overseastrade passedthrough the Canal notwithstanding the fact that cargo moving to or from the United States through the Canal amounted to 81,827,603 long tons out of a total commercialcargo movement at the Canalof 118,627,000 long tons in fiscal year 1971.' Two points of view emerge on the importance of the Canalto oceanbornecommerce. One is the relative size of what goes through the waterway en route to and from a 75 31ri IA~~, ik~~AK~ .WA'I5 The largest volume of exports have for years originated from the East and Gulf Coasts of the United States, Venezuela, the East Coast of Canada,the Netherlands Antilles petroleum products!, and Cuba sug- ar!. The largest receiversare normally Japan, the West Coast of the United States, Chile, and Peru. Table 3 presents comparable data for cargoesoriginating in the Pa- cific bound for the Atlantic, with the principal receiving countries shown. In this case,ten landsled by Japan, Ecuador, the West Coast of the United States, the West Coast of Canada, and Peru exported over one million long tons of cargo each in 1973, compared to six countries shipping similar amounts from the Atlantic. It will also be noted that there were 12 countries in the Pacific receiving more than one million tons of cargo each, as well as 12 in the Atlantic. A remarkable feature of Canal trade is the prominent position of the United States East and West Coasts both as shipper and receiver. It is in the first or second position in most instances. A second feature of note is the decided preponderance of cargo moving from the Atlantic to the Pacific. This has not always been the case. Prior to WorM War II, the preponderant tonnage moved from the Pacific to the Atlantic with heavy shipmentsof oil and lumber leading CARGO AND TRAFFIC TRENDS the lAray. In future deCades,prOduCtS from lands adjoining the Pacific may again become ascendantaS the eCOnOmieSOf theSecountries grOw. predominance of U,S.-Asian Trade As seen in Table 1, the East Coast United States-Asia trade route carried 4p percent of all commercial cargo moved through the Canal in 1973. The next largest route, East Coast United States-West Coast South America, carried 6 percent of the total cargo tonnage. Space does not permit a detailed examination of all trade routes listed in Table 1, bUt the preeminent position of the East Coast United States-Asia route merits further attention. This route has been the leader in terms of cargo tonnage since 1955. Tonnage has multiplied six times during the period to reach a record Table 2 Leading Countries of Origin and Destination of Cpmmercial Canal Cargp 4SCBI ear 1973 one percent or more! ATLANTIC TO PAClFTC COuntr1es Qrx ZnatZn Car O Countries of Destxnatzon T~onna e 8 Total, T~onna e 'I Total E, Coast U. S. 48,398,420 66. 0 Japan 36,699,315 50,0 Venezuela 6, 776,920 9.2 W. Coast U.S. 8,911,781 12.1 E. Coast Ca nail a 2,105 I939 2.9 Chile 2,515,574 3.4 Ne th. An t1 l les 1,942,110 2.6 Peru 2,209,576 3.0 Cuba 1,769,551 2.5 South Korea 2,168,564 3,0 Be la sum 1,021,7 36 Chiesa 2,048,7 34 2.8 Jama1ca 948,105 1.3 Taiwan 1,712,104 2. 3 Hex 1 co 946,715 1.3 Mexico 1,660,133 2.3 Hest Germany B 32,270 1.1 W. Coast Canada 1,376.679 !.9 Nether land s 826,751 1.1 Ecuador 1, 347, 183 1.8 Un~ted Kingdom 796,651 1.1 Austral>a 1,068,110 1.5 Panama 752,579 1.0 El Salvador 1,013,081 1.4 South Vietnam 944,&39 1.3 Co 1 ombia 824,940 1,.1 USSR 814,622 1.1 Nicaragua 776, 856 1.1 Summer b Re 1 ons Ca~ro Ori lnatin From Car o Destined To l Total T~onnee I Total 47,462,050 64.7 E. Coast U S. 48,398,420 66.0 Asia 8,911,781 12.1 E. Coast So. Am. 7,985,491 10,9 'W, Coast U,S. 7, 147,642 9.7 Europe 6,5 39,160 8.9 W, Coast So. 6,059,969 8.3 Hest:nd1es 6,022,042 8.2 W. Coast Cent. Am. 2,436,373 3.3 E. Coast Canada 2, 105,9 39 2 9 Ocean>a 1, 376,679 1.9 E. Co a s t Cent.. Am 1,756,845 2.4 W. Coast Canada Afr1ca 544,439 0,7 Middle East 32,158 73, 394, 494 100. 0 .Otal 73,394,494 100.0 'Panama Canal ompany, Annual Re ort, 197 3, Table 19. Japan to the United hsates. 1ue u.u~sta trade as a wuute auttmmeu tu Table 3 LeadingCountries of Origin and Destination of Corn merci Can argo isca ear 1973 e one percent or more! PhCIFIC TO ATLANTIC Countries Ori inatin Car o Countries af Destination T~onnac ~ Total T~onna a ~ Total Japan 12,144,003 23.0 E. Coast U.S. 22,808,656 ~ 3.4 Coast U. S. 6,944,438 13.2 West Germany 3,236,415 6.1 Ecuador 6,l59,124 12.2 United Kingdom 3,200,563 6.1 W. COast Canada 6,213,087 11.8 Nether lands 2,927,282 5.6 Peru l,211,222 8.0 Belgium 2,410,123 l.6 Australia 2,789,874 5.3 Trinidad/Tobago 1,923,396 3.6 Colombia 2 s208,614 l.2 Italy 1,394,289 2.6 Phi l i pp 1 nes 2,108,831 l.Q Colombia 1,343,877 2.6 Chz le 1,671,608 3.2 Netherlands W. Indiea 1,176,961 2.2 Nev Zealand 1,212,758 2.3 Panama 1, 169,472 2.2 South Korea 929,061 1.'8 E. Coast Canada 1,130,979 2.1 Tel'wan e00,564 1.5 France 1,102,84l 2.1 Puerto Rico 928,071 1.8 Ve ne sue la 903,719 1.7 Cuba 756,870 1.4 Spain and Portugal 713,760 1.4 Braxrl 558,421 1.1 Greece 518,703 1.0 Suiar b Re ipna Car o Ori inatin From Car o Destined To T~onnac 92 Total T~onnac l Total Asia ls,ll6,402 34.l E. Coast U. S. 22,808,656 43.4 W. Coaat So. hm. 14,67!,023 27.8 Europe 18,619,891 35.3 W. Coast U. S. 6,944,438 13.2 West Indies 5,170,784 9.8 W. Coas't Canada 6,213,0B7 11.8 E. Coast So. Aas. 2,929,790 5.6 Oceania 4,734,940 9.0 E. Coast Cent. Am. 1,537,872 2.9 Coast Cent. Am. 2,029,645 3.8 E. Coast Canada 1,130,979 2.1 Africa 393,102 0.7 haia Riddle East! 118 461 0.2 Tot.al 52,709,535 100.0 52,709,535 100.0 a Panama Canal Company, Annual Re ort 1973, Table 20. CARGO AND TRAFFIC TRENDS over 40 percent of the entire cargo movement at the Canal in $97$, ],972, and 1973 The growth and composition of the East Coast U.S.-Asia trade is shown in Figure 19. 3c 1945 195' 195' 19QQ 1945 19 7Q 19,"~ There are elements associatedwith this trade that make its future uncertain. Ordersfor vesselsbuilt in Japaneseshipyards have played a largepart in the movementof coaland scrap iron fromthe United MARITIME COMMERCE/FUTUREOF THE PANAMA CANAL 80 70 60 40 u 20 io 64 ee se 70 72 YEARS 70 20 64 68 70 72 YEARS Figure 20. CARGO AND TRAFFIC TRENDS States. With a glut in world shipping tonnage now, a curtailment of oIders for coal and scrap may occur. Other factorsmay enter the pic- ture, such as increasesin Australian supplies of coal, exports of Siberian coal, and the construction of deepwater terminals in or near Chesa- peake Bay allowing superships to carry coal to Japan by all-ocean routes around the Cape of Good Hope. Increasing demands for energy the United States will call for greater use of coal in this country. For the near future, however, coal shipments through the Canal will prob- ably continue within the range of 10-18 million long tons a year. Other cargoes may eventually supersede the large coal movement, In 1973 grain shipments to Asia, for example, amounted to over 17 mil- lion tons. Under agreements concluded by the Nixon administration with China and the Soviet Union, large grain shipments will be made to these countries. Part of this will transit the Canal. Phosphates and chemicals shipments may also increase to the Asian lands, The markets of China, Taiwan, Indonesia, and the Philippines each have potentials for growth that will supply additional opportunities for U.S. trade in the coming decades. Rolesof Different Areas as Origins and Destinations of Cargo Figures 20 and 21 illustrate the roles variousareas of the world have playedin generatingCanal cargo movement. The top half of Figure20 shows how much of that Panama Canal cargo moving eastward origi- nated in various geographical areas The West Coast of Central America, Oceania, the West Coast of North America, and the West Coast of South America have increased their exports through the Canal only slightly over a 23-year period. Asia, on the other hand, hasbecome the predominant exporter and most of the increasein eastward moving trade has originated in Asian countries. The bottom half of Figure 20 shows that North America and Europe have been the primary recipients of PanamaCanal eastbound cargo for the baseperiod, but the %estIndies, South America,and Central Amer- ica are now developing economies capable of absorbing a healthy growth in imported goods. Most of theseimports are petroleumand petroleum products from the WestCoast of South America. The top half of Figure21 showsthe volumeof Canalcargo imported by variousareas bordering the Pacific Basin.The generallevel of west- bound cargo is larger than eastbound,and againAsia standsout. Most of theseimports are bulk commoditiesand they movelargely to Japan. The dip in the fiscal year 1972 total is due to a recessionin Japan which sharply curtailed imports of bulk commoditiesfrom the East Coast of the United States. The bottom half of Figure 21 showswhere the Pacific-boundCanal cargooriginated. It is no coincidencethat the East CoastNorth Arner- ica cargo figure matchesthat of Asia'sas a destination.This rnatch S2 MARITIME COMMERCE/FUTURE OF THE PANAMA CANAL eo 70 60 20 iC 6z 64 70 r2 YEARS BO 60 40 50 20 64 66 70 72 YKARS Figure 21. : ARGO AND TRAFFIC TREYDS reflects the dominance of the East Coast United States-Asia trade route and illustrates that IJnited States and Japan trade through the Canal has been closely tied for a number of years. The worldwide scramble for oil and other raw materials is likely to cause an alterat,ion in this pattern ill the future as Asia and the United States look for new sources of ma- terials and new markets for their goods. The overall level of Canal cargo movenient will be affected by the strength of national economies. Assumingthese do not falter, traffic levelsshould remain high. Growth Patterns of Cargo Movement Cargo movement is a sensitiveindex of commodities in demand. It is also an index of the health of the world economy. The overall trend of Canal cargo movement was shown in Figure 13, The persistent growth of cargo since 1945 has been particularly nota- ble. Periods of low growth have occurred, as well as some intervals of decline, but these have been temporary. The generaltrend hasbeen one of strong growth. The 127 million long tons attained in 1973 is a large vault ahead from the 27 million tons that passed in 1945. Much of the cornrnerce that has moved through the Canal would probablyhave made its way betweenthe principaltrading countries without the Canal. But the existence of the shortcut has facilitated the interchange by providing faster, more economical movement. The Period 1963-1973 Cargomovement more than doubled between1963 and1973, rising from 63.0 million to 127 million long tons. The closure of the Suez Canal,economic prosperity and growthin major countries,heavy de- mandsfor coal, scrap iron, and grain in Japan,along with a heavy movementof goodsto South and SoutheastAsia, contributedto this. Large shipmentsof petroleumproducts from Venezuelaand the NetherlandsAntilles to Pacificports, iron ore from Chileto Europeand the United States,coal to Japan,and grain from Gulf Coastports to Asia contributed to the doubling of Canal cargo, and make up a large proportionof the movement.On the reverseside, there is a substantial f1owof manufactures of iron and steel from Japanto the United States and Western Europe. Table 1 of ChapterThree lists the growth of Canalcargo. The rnove- ment of 26 commodities accounted for one million tons or more in 1973, as listed in Table 4. Thetotal shipmentsof coaland coke have outrun other trades in recentyears, although crude oil andmanufactures of iron and steel and grain arc catching up. Most of the large-volumecargoes are rawmaterials, agricultural items,petroleum products, and semi-manufactures.Manufactured 84 MAR[T[MR COMMERCE/FUTUREOF THE PANAMA CANA[. gods,like automobiles and trucks, Inachinery, electrical apparatus, etc., afford lessoverall tonnage. Manyof the cargoesmoving from the Atlantic to the Pacificare the productsof industry,of intensiveagriculture, or stemfrom applicatjpns of advancedtechnology. The flow of many of these itemsto countries borderingthe Pacificis a reflectionof the needsand demands of socle ties located there, Some economistsare suggesting that the Pacific region will become the global centerof worM tradeby the year2000, as the Atlantic has been in the past, With the industrial growth of Australia, Japan,China, Taiwan,and Indonesia,along with the furtherdevelopment of the West Coast countries of Latin America, the potential exists for large inter- changesof goodswith other parts of the world in the decadesahead. Table 4 Principal Items of Cana[ Cargo» t ousan o ong tons! « t1ant ic t > Vaci f ic Pacific t.o I tIant.ic 1974 1973 1974 1973 'la1 ~in<1 coke. 18, 233 1 3,6 > Lumbe r «! roduct s '86 5, 392 t ld!: 48 Ntrs, iron t' stce1 >,737 7,867 t'lt ! s«'«la t us «I 4, '>81 tr.!n or» 2,346 2,100 !!rn 10, 920 8,4 tf! sugar 3,229 3, 347 : nyl!! ans 349 4,498 Crud< o>1 I 0,727 7,046 f>u<'I o t 1 rsd I 6, 429 2,94f! Pul! >wood 1,716 1, 151 mct a1 3, 4 3,234 !'etrolc um coke ~ 1,69> 1,897 .'! U '!'.!tt,tm.! '. n >1 . m«' tny, Annua1 «te>art, 1973, Table 25. Although the tonnages of manufactured goods proceeding from Asian ports to the East Coast of the United States, Canada, South America, and Europe are relatively modest, being in the neighborhood of 9 millionlong tons a year,they havebeen increasing steadily. C J 9O Out too«' Coal, petroleum products, grain, lumber and products, ores, phos- phates, sugar, and manufactures of iron and steel have been the leading HI~TK14j a 'm gvcv acr~ c.~~y~v~ i Shipmentsof lumberand forest products should remain more or less constant,given world demand, the developmentof substitutes, and the factthat thereare few standsof virgintimber remaining to becut. Theoutlook for Canaltrade is for growthin the generalcargoes and for large-scaleexpansion of miscellaneousmanufactures shipped in con- tainers.These are not expectedto producesudden, dramatic increases in Canaltraffic, asthe coaltrade did between1966-71. They will rather contribute to an upward expansion stretched over many years as eco- nomicgrowth and industrialization proceed in manyparts of theworld. Projectionsof PresentTrends ln consideringthe futureof theinteroceanic canal, it is importantto obtainan estimateof the probablemeasure of cargotonnage that will betransiting the Canal in theremainder of thecentury. Although the numberof lockagesis the measureof Canalcapacity, the volume of cargoseeking passage is the primary basis upon which transits occur. Internationaltrade, and the cargo it generates,is an expression of the conditionof the world'seconomy. Relating historical variations in the economicbase to Canalcargo movement and assumingthat the rela- tionshipwill continueover time, it ispossible to forecast future magni- tudes of Canal cargo. Bysurveying what has happened over the past 25 years, indications canhe gainedof what is possiblein comingyears. Estimate of Future Traffic Pattern In estimatingpossible future traffic, we have made four assumptions. Theseare that ! thepresent locks will beretained at leastuntil the MAR[T[ME COMMERCE/FUTURE OF THE PANAMA CANAL year2pp0; ! toils will not beincreased at a ratefaster than the world rate pf inflation; ! international economicand monetary conditions will be generally stable; and ! no great power war will occur.s Changesin theseassumptions, as in the developmentof large new trades,or the disappearanceof existing ones, could alter the basiso f the estimate, leading to different results. AnalysisBased on WorldEconomic Growth The following analysis is based upon three additional assumptions. ! that GrossWorld Product GWP!, which is the sum of all known grossnational products, is an appropriate measure of world economic well-being; ! that GWP will continue to grow at a percentage growth rate closely approximating the historical trend from 1950 to 1967; and ! that the historical relationship between total Canal cargo and GWP will not change appreciably in the next two or three decades. Table 5 Gross World Product. Data 1967 U.S. Dollars Year i.n Billions Total Canal Car o long tons! 1950 $ 828.7 30,364,982 1951 885.8 31,281,525 1952 961.1 36,902,908 1.95 3 958.5 41,203,401 1954 977.6 41,882,368 1955 1,043. 3 41,548,037 1956 1,079.4 46,331,901 1957 1,113.9 50,659,057 1958 1,124.4 48,982,036 1959 1,186.9 52,328,987 1960 1,244.3 60,401,733 1961 1,293.9 65,2 l6, 581 1962 1,364.9 69,003,475 1963 1,425. 3 63,877,200 1964 1,519.6 72,168,690 1965 1,586.8 78,922,931 1966 1,682.4 85,323,463 1967 1,743.6 92,997,958 Thethird assumptionis criticalto the analysis,This assumption rests on the premisethat trade carriedon in a rationalmanner permits par- tiesto achievea highernational income and thus a highergross national product.A risein tradeshould result in a risein GWP,Some portion of this trade will transit the Panama Canal. Q~-uasa ioi rnlsanarf >a 92snore.~ .~n. cesnpu .. as~jt..-... lnieroceanicCanal Study CommissionReport of 1970 andfrom a num- berof other sources. This data is summarizedin Table 5, The averagepercentage growth rateof GWPfrom 1950-67was deter- minedby a Least SquaresCurve Fitting computer program. This rate wascalculated to be 4.33 percenta year,with a correlationcoefficient of 0.99 out of a possible1.00, indicating that the growthrate of GWP has differed little year to year from its overallaverage. This supports thepremise that 4.33 is a reliablebase figure. The actual 1971 GNP was only4 percenthigher than our calculations forecast for that year.' Assumingthat no majorpolitical crises disturb economic growth in the next thirty years,this programforecasts GWP to beapproximately $6.9trillion in 1967U.S dollarsby theyear 2000, GWP and Canal Cargo Prediction A linearleast-squares analysis of GWPversus total cargo data pro- duceda straightline approximation with a correlationcoefficient of .98.Given a $6.9trillion GWP forecast, theoretically there should be a cargomovement of approximately426.4 million long tons passing throughthe Canalby the year2000. Thisfigure represents a projection of presenttrends, but is onlya guidelinefor thinking. The question associated with extrapolating past growthis to determineto whatextent changes in trends will cause actualcargo movements to deviate from the guideline. Four Additional Approaches In an effortto gaugethe effect of differentassumptions onprojec- tionsof movement,four other analyses were performed. In these,em- phasiswas placed upon gross national product asa measureofcapacity for trade. The historicalrole of a smallnumber of principaltrading nations, representingalarge percentage ofPanama Canal traffic, was analyzed in a mannersimilar to the first caseas a meansof givingan estimateof future traffic. C7 ~ 1 r------"- trate the method and represents an upper bound on forecasted Panama Canal cargo. Estimate Based on Trade of Principal Cargo-Receiving Nations Twelve nations each had over one million long tons of Panama Canal cargo destined for their ports in 1969, These were: Australia Peru Canada United Kingdom Chile United States Ecuador German Federal Republic Japan South Korea Netherlands Italy Cargodata is givenin Note 9.' Total GNP for these 12 nations is given in Note 10.'0 Computer analysis shows that the total GNP for these countries has been growingat approximately4.3 percenta year since 1950, with a correlation coefficient of 0.99, If this growth rate continues, the total GNP of thesenations will be approximately$4.6 trillion in 1964 U.S. dollars by the year 2000. Using a secondleast-squares analysis on total GNP versuscargo trans- iting the Canal, it was found that as the 12-nation GNP total rose cargo did also in direct proportion. A $4.6 trillion QNP would therefore infer that in the year 2000 the 12-nationrelated cargo transiting the Canal shouldbe on theorder of approximately387,2 million long tons. The valueof Canalcargo set out abovedoes not represent the total cargoexpected to passthrough the Canal in the year 2000, but only that contributed to the total potential cargo by the 12 nations. CARGOAND TRA VFIC TRENDS ProbableFuture Relationship of ReceivingCargo to Total Cargo Some assumption must be made for the remaining volume of traffic. The percentageof total commercial cargo contributed by these 12 na- tions as destination has been fairly constant with time, averaging 82 percent.Note 9 givesthe yearly percentages. Qverall, the 12-nation related cargo may come to representa slowly declining percentage of the total Canal cargo movement as the econo- mies of other countries contribute more to world trade. Taken alto- gether,nevertheless, the percentagerepresented hy the basegroup should remain above 75 percent of the total cargo movement at the Canal for the remainder of the century. An estimate of total commercial cargo, using the 75 percent valu- ation for the part contributed by the 12 nations, givesa figure of approximately515 million long tons of commercialcargo that might transit the Canal by the year 2000. The noncommercial component niay be on the order of possibly15 million tons,which is a generous estimate,giving a grandtotal of about 530 million long tons. Summary of Estimated CargoTraffic For the precedinganalyses, five differentassumptions led to five estimates,two of which were presentedhere, of possiblefuture cargo movementthrough the Canalby the year2000. The estimates given for total cargo appear in Table 6. These estimates can be compared with those arrived at in the Report of the interoceanicCanal Study Commission.This predicteda totalof 485 million long tons of cargofor the year2000." TheCommission figuregrew out of theassumption that historical trends would be con- tinuedand representedan upperlimit. TheCommission in the end concludedthat actualcargo gains would probably fall lowerthan this to a valueof approximately357 million longtons due to an expected reducedrate of growthof trafficto andfrom Japan. ' Giventhe uncertaintiesbuilt intoan extrapolation of past trends, the forecastscontained in Table6 arenot significantlydifferent from other results. The computationssuggest, in short,that cargomovement on the order of somethingas high as 400 to 500 millionlong tons is con- ceivableby the year 2000 if trends continue. Adjustment for ForeseeableChanges in Trends The recent dramatic increasein the cost of energyintroduces a new factor into the forecasts.Lack of petroleum,reflected in higherprices, isexpected to causean economic slowdown in Japan, Europe, and the UnitedStates in the next few years, Shipments of heavybulk cornmodi- tiesmay be affected if shipping has difficulty in obtainingfuel oil. '3 0 0 l exist in 92 CARGO AND TRAFFIC TRENDS 93 portation.However, while a slowingin theproduction and consump. tion of such manufactured items as automobiles will reduce the quan tity of suchgoods passing through the Canal,a reductionin the availa- bilityof ship'sfuel, resultingin highertransportation costs or reduction of transport services,will have a more direct impact. The assumption that Gross Production and Panama Canal traffic wil] vary in direc proportionin the futureas it hasin the pastis unwarrantedin light pf the direct impact fuel cost increaseshave on shipping services.The use of nuclearship powerplants, more efficient designs,higher load factors, and better schedulingmay tend, alternatively,to reducethe long-run impactof costly,uncertain energy supplies on shippingservices. New technologiescannot be foreseenand shouldnot be counted uponto reducetransport costs significantly. Barring the development of nuclear fusion technology and large new oil discoveries,energy sup- plieswill becomeprogressively scarcer and more expensive than previ- ously.This will offsetthe long-runcost advantages of some of thenew technologies. Asthe assumptionfor future GrossProduct growth was a subjective estimate,so alsomust be the assumptionfor the futurerelation of actualPanama Canal cargo to GrossProduct levels. Based on theclose relationshipthat hasexisted in recentpeace-time between Panama Ca- nal cargoand national economic growth and the increasein transpor- tation costs,we believethat cargowill continueto growin stepwith worldproductivity, butat a proportionallyslower rate than previously. '~ Assumingthat the effect of energyand raw materials scarcity reduces thegrowth rate relation of cargoto GWPby 5 percent,a GWP of 4.9 trillion dollarsin 2000would then imply that total Canalcargo would be of the orderof 280 millionlong tons that year.Similar 5 percent reductionsin the growth rates arising for thefour other analyses yield comparable estimates: GrossWorld Product Analysis 280 millionlong tons 17-NationOriginating Group Analysis 325million long tons 17-NationDestination Group Analysis 310million long tons 12-NationOriginating Group Analysis 310million long tons 12-NationDestination Group Analysis 345million long tons Figure22 plots the maximum and minimum orders of magnitude forecastsofcargo growth that follow from the preceding analysis. Table 7 lists the maximumand minimumtonnage forecasts in five-year increments, Other Cargo Forecasts Twoother attempts have been made to estimatefuture Panama Ca- nalcargo movements, Theinteroceanic CanalStudy Commission esti- mateof 357million long tons for theyear 2000, mentioned previously, MARPPlMECOMMERCE/FUTURE OF THE PANAMACANAL umedthat someof thiscargo would be attractedaway from the Cmalby othercompeting modes oftransport such as mini-bridge trans- podand all-ocean carriage in superships around South America and Africa.An EconomicResearch Associates ERA! study,based on a etaiiedexamination of economic market factors for 27 commodity classesapplies only up to 1985.Table 8 liststheir conclusions. Other ERAresults will be discussedin ChapterFive. Thesefigures are in substantialagreement with theauthor' s, but weIe arrivedat by a differenttechnique. Table 7 Total Panama Canal Car o Tonna e Forecast mxllaons o long tons! 1980 1985 1990 1995 2000 Maximum 14 5 170 240 290 Minimum 122.6 141.8 163.5 l96.4 235.2 280,7 Table 8 Pro'ected Panama Canal Traffic b Economic Research Associates' t ousan s o ong tons FY 1974 FY 1975 FY 1976 FY 1980 FY 1985 135,418 136,489 141,003 160,300 184,942 ~Pro osal. to Increase Tolls, Panama Canal Company, 1973, p. 72, Transit Forecast Givena rangeof projectedpotential cargo movement, it is possibleto derivean estimateof possiblefuture levelsof ship transits throughthe Canal. In order to forecast future transit levels,it is assumedthat: 1! The diversion of projectedcargo from the PanamaCanal to other transport modes, such as mini-bridge or superships mov- ing on all-seatracks around Cape Horn or the Cape of Good Hope, will be small and thus that forecastedpotential cargo tonnage will closely approximate actual tonnage figures; 2! The averagecargo capacity of ships transiting the Canal will continue to grow at a constant rate as it has for the past eight years; 3! The averageload ratio of ships will be the same as the average value of the last eight years; and 4! Each lockage will transit only one ship. There will be few tandem lock ages. CARGO AND TRAFFIC TRENDS Explanation of Assumptions lt was assumedthat future bypass traffic would be insignificant for severalreasons. First the presentland-bridge and mini-bridgeopera- tions in the United Statesare economicallyattractive only for high- value,low-density commodities, moving on a limitednumber of trade routes. Studiesindicate that about 15 percentof PanamaCanal cargo could eventuallybe divertedto the mini-bridgeoperation, although this maychange if shipfuel oil pricescontinue to riserelative to rail costs. Thereare manyinstitutional problems with the mini-bridgewhich have yet,to be resolved,and these will determinehow successful the rnini- bridgeoperation isin attractingcargoes from the Panama Canal." This couldchange if it becameFederal policy to supportthis operation throughsubsidy or favorableregulation. Unless a changeoccurs which is possibleand perhaps desirable, but unforeseeable,it does not appear likelythat land-bridge or mini-bridge operations will attractsignificant levelsof potential PanamaCanal cargo. Second,pipelines for both petroleumand slurried solids may some daymove commodities thatwould otherwise govia the Canal. Where thesepipelines will belocated, how big they will be, and what they will carryare questions that cannot be answered ina 30-yeartime frame. Thediscovery and development of coal fields, oil fieldsand various mineralores will havean effect upon pipeline usage. The use of coa! andoil will dependon where the deposits are located, what it coststo extractand transport them, and what otherenergy sources are avail- able,such as nuclear power plants. The energy policy of governments wiLLalso play a role.Given the lack of anypipeline presently in cornpe- tition with theCanal, and the worldwidedistribution and search for rawmaterials, it seemsunlikely that a long-termhigh-volume trans- continentalmovement of a singleraw material will develop. Since this is thekind of movementneeded to justifyuse of a pipeline,it appears that,whi!e some pipelines maybe built, we cannot foresee them having anidentifiable effect on Canal cargo movement. Chapter Seven contains more on the economicsof pipelines. Third,the increasing useof superships tocarry bulk commodities posesa significant question forCanal planners since the locks are un- ableto accommodate shipsover 80,000 deadweight tons dwtl. Tankers on the orderof 350,000dwt are not uncommon, and a significant proportionofall tonnage afloat isnow composed ofships too large to passAtthe present, Canal.the United States has few ports deep enough to handle shipsof 100,000 dwt and over, and until deepwater portsbecome more generallyavailable in the United States, the dimensions ofthe Canal lockswill not bea factorlimiting supership use. This follows because 66percent of Canaltraffic passes through U.S. ports. Furthermore, MARyyggE CQMMER 'K/i'U'i'UN.K Uf' 'i HK YAIMAMA :AgpL supershjpsneed large volumes of cargoto makethem profitable. There arefew tradesmoving through the Canalwhich appearlikely to be divertedto supershjpsoperating on all-sea routes when deepwater ports become available. The constructionof deepwaterports, permitting ship drafts of up t 100feet comparedto the presentaverage of 40 feet,is awaitinganswer to the questionsof who will regulatethem, and how to lessentheir effect on the coastalenvironment. The cost savingspossible through u~ of supershipsmakes it desirableto havedeepwater ports. At an est; matedcost of $200 million 1970 dollars, a deepenedDelaware Bay po could accommodate250,000 dwt ships and could tranship up to 45 million tons of coaland 12.5 million tons of iron ore annually.' ees ieger eea A@9 l970 l97t l972 f973 'I97< A primary economy the superships achieve is in their crew costs. A modern 300,000 dwt bulk carrier can be operated with no more crew than one of 80,000 tons. On the other hand, considerably more fuel must be expended in taking the all-ocean routes compared with vessels that can operate by way of the Canal shortcut. The penalty the larger ships must pay for their longer trips is increased as the cost of fuel rises. This thus offsets the economies of supership operation as compared to use of traditional size ships. During the next 10 yearsthe lack of deepwaterports in the United States will discouragethe use of supershipsto and from the United States. Over the longer run, the combination of fuel savings plus flexi- bility for servingsmaller shipmentsof goodswN favor use of ships able to transit the Panama Canal versus superships. There will doubtless be ;ARG AND TRA FFLK TREN DS exceptionsto this, but this appearsto bethe likely trend.%e therefore QQnot expectthe supershipsto drawoff significantvolumes of Panama Canalcargo in the foreseeablefuture. The averagecargo capacity of oceangoingcommercial vessels trans- itingthe PanamaCanal, their Panama Canal net tonnage, is shown in p'igure23 for the pasteight years. A least-squareslinear computer approximationof this trendforecasts average Panama Canal net ton- nageas 14,670for the year2000. Since the T.S.S. To!evo Bay is ap- proximately36,000 Panama Canal net tonsand represents an upper limit on ship sizecapable of transitingthe Canal,one-half of its cargo capacity,or 18,GOGPanama Canal net tons, is a reasonableestimate of howhigh the averagevalue of shipcargo capacity may eventually rise. Thelinear extrapolation of recentgrowth trends approaches, but does not exceed,this estimated upper limit by theyear 2000 and was thus deemedan acceptablerepresentation of future statistics. Table 9 con- tainsthe forecastderived from this computerapproximation. Table 9 Forecast of Avera e Panama Canal Shi Net Tonna e 1975 1980 1985 1990 l995 2000 9,007 10, 139 11,272 12,404 13,537 l4,670 Table10 liststhe averageload ratio for oceangoingcommercial ships for thelast eight years, i.e., the ratio of averagecargo tonnage per ship to averagePanama Canal net tonnageper ship. Table 10 Avera e Load Ratio 1966 1967 1968 1969 1970 1971 1972 1973 1.03 .973 .996 1.00 1.05 1.06 .963 .996 Theaverage value for the1966-1973 period was 1.00. This is to say that,on the average,for eachPanama Canal net ton of shipcargo capacitythat transited the Canal one long ton of cargo transited. This hasbeen. the case despite the widevariability in thedensity of cargo andthe fact that ships have transited with varying degrees of loading rangingfrom fuHyladen to entirelyempty. As a test for long-termchanges in trends,a similaranalysis was performedonPanama Canal data from 1937 to 1940, a periodsubse- quentto thelast change in rulesdefining Panama Canal net cargo tonnagespaces, and prior to significantwartime activity. The average lal 50 0 O 000~/ Q.IQNIl & 838NlN 98 gARGO AND TRAFFIC TRENDS ratio for this period was 1.07 or only sevenpercent different from the average30 yearslater This implies that the ratio of transitedcargo to Panama Canal net tonnage is reasonably constant with time, It was assumed that there would be no tandem lockages. This sumption permits equating lockagesto transits.Lockages are the lim- iting factor for Canal capacity, but it is lessconfusing to discussca- pacityin termsof transits Tandemlockages of oceangoingcommercial vesselswere fairly cornrnon early in Canal history when freighters were no more than five or six thousand gross registered tons. Such lockages are much rarer at this time, being less than one in ten. They will decreasefurther as the average size of ships increases. Forecast of Canal Traffic Levels +ith the forecasts of average cargo capacity of transiting vessels,of total Canal cargo movement and using a load ratio of unity, it is pos- sible to calculate the number of oceangoingcommercial transits likely to occur in particular years. No effort is made to distinguishthe types of cargo,types of transitingvessels, or evento separatecargo carried in oceangoingcommercial ships from other typesof PanamaCanal traf- fic.'~ Theserefinements would contribute little to the accuracyof the transit forecast, given the uncertainty in actual cargo movementsand the many economicand political variablesthat affect international trade which cannot be quantified. The equationused to computepossible future Canaltransits is as follows. Number of transits = tons of cargo transiting divided by load ratio x averagePanama Canal net tons! Workingthis out with the datacontained in Tables7 and8 yieldsa forecastrange of transitsby five-yearperiods as shown in Table11. Table 11 Forecast of Canal Transits 1975 1980 1985 1990 1995 2000 Maximum 16, 100 16,770 17,740 19, 350 21,420 23,517 Minimum 13,610 13,980 14,500 15,830 17,370 19,130 This is plotted in Figure 24. We view these forecastsas suggestinga rangeof possibilitieswithin whichtraffic is reasonablylikely to faH.The farther into the futurethe forecastsextend the more indefinite they must be, for future cargo movementsbecome less a functionof presentcircumstances and morea reflection of intervening events. tviis,' P Lives va vayu~ wa~v ~vda'Jv slllvL] vo Jv 5:4145ig Ti& Kp ~ temporary circumstances. Other Transit Forecasts Both the Interoceanic Canal Study Commission IOCSC! and ERA have forecast Panama Canal transit levels. The IQCSC made two projec- tions based on assumptions on the percentage levels of cargo carried in general cargo vessels as opposed to bulk carriers such as tankers. These forecasts are displayed in Figure 28. Actual Canal experience has been that roughly 3G percent of cargo is moved in freighters so that the "IOCSC 25%" in this figure appears to be the more accurate of these two analyses. Table 12 lists the ERA forecast. Table 12 Panama Canal Transit Pro'ection of Economic Research Associates* FY 1974 FY 1975 FY 1976 FY 1980 FY 198~ 14, 300 14, 337 14,619 15,960 18,09l *Proposal to Increase Tolls, Panama Canal Company, 1973, p.73. CARGO AND TRAFI'IC TRENDS Effect of Suez Reopeningon PanamaCanal Forecasts gone of the preceding forecastsallow for the reopeningof the Suez Canal After the 1967 closure of the Suez Canal, the PanamaCanal experiencedan increasein traffic associatedwith MiddleEast trade rout,es,In 1 973 approximately $9.5 million in tolls were recovered from this traffic that otherwise might not havetransited. Due to continued strife in the region and the as-yet-unknownlevel of Sueztolls, it is problematicalhow much of the traffic divertedfrom Suez will return once that waterwayis reopened.Since this traffic represerltsabout 7 to 8 percentof total PanamaCanal business, fore- castingthe effect of reopeningthe Suez Canal would require a finerline of precisionthan has been attempted. Allowing for UnforeseenElements The foregoingcalculations have rested upon trade figures, national income,and mathematicalcomputations. They have not attemptedto equatethe possible effects of political,social, or psychological forces thatmay ariseto modify orspur cargo shipments. They likewise do not reflectthe consequences of decisions to devaluecurrencies, raise protec- tionistbarriers, or stimulatetrade through new internationalagree- ments. Manyelements will come into play overthe next30 yearsaffecting overseascommerce in oneway or another.The bearing of theseupon Canalcargo movement is difficult to foresee.Nor cantheir course be mapped with accuracy. To make allowancefor the intervention of such forcesand actions, the data baseused in thisstudy was purposely broadened to take ac- countof a varietyof historical circumstances. Thetime and experience covered by the years 1950 to 1969encorn- passa numberoffavorable and adverse circumstances. It ishoped that thesewiU makesufficient allowance for the appearanceof other vari- able elements in the future. Conduction With overalltransits for the year2000 forecast at a levelof no more than23,500 where capacity of the existing canal is figured at something lessthan 26,800 transits, depending onthe size and mix of ships at that time,it appearsthat the interoceanic canal will not be taxed beyond reasonableservice limits within this century. This is notlikely to hoM truebeyond about 2010. While the annual number of ships transiting the PanamaCanal has been constant for the last fouryears, the in- creasingsizeof the vessels has continued theupward pressure onCanal capacity.The gap between the ultimate capacity of the Canal and the levelof transitsis still closing because the estimated ultimate capacity innumbers of transitsiscoming down as ship sizes increase. The Canal MARITIME COMMERCE/FUTURE OF THE PANAMA CANAL companyis reviewingits estimateof ultimatecapacity in lightof recent shipsize trends. This review is expectedto resUltin a figureconsider- ably belowthe 26,800transit estimate. Exactly when the capacitypf the garial will be exceededcannot be clearly foreseen. For this reason, we recommendthat a closewatch be kept on traffic conditionsduring the riext ten yearsin order to project possiblelines of developmentto the 2000 to 2010 period. CHAPTER FOUR FOOTNOTES 1. Panama Canal Company, Annual Report, 1973, Table ] 3 Z. Ibid., 1973. Tables 19-20. 3. Statistics on overseas trade are derived from Shipping and Canal Operations, Hearings bei'ore the Subcommittee on PanamaCanal of the Committee pn Merchant Marine and Fisheries, House of Representatives, Washington, 1973, p. 12. 4. Table 24 in the Annual Reports summarizes the shipments from Asia to the various regional areas. 5, We Panama Canal Company has recently proposed a 20 percent increase in tolls. See Netc York Times, December 22, 1973. Should the increase take effect, it would be the first change since 1936 and thus would not violate our assumption. 6. Sources of GWP data: Gross National Product: Grorath Rates and Treed Data by Nation and Coun- try, April 1969. Washington'. AID, Department of State; Finance and Deuelop- ment Quarterly, No. 1, 3969. International Monetary Fund and World Bank Group; Statistical Yearbook of the United Nations, 1967; Yearbook of Na- tional Accounts, 1967. The United Nations. 7. Statistical Yearbook of the United Nations, 1972, p. 50. 8. The analyses as a whole are presented in Projections of Possible Future Cargo Movement at the Panama Canal, M.I,T. Sea Grant Program, Interoceanic Canal Project, Draft Report No. 7, Cambridge, Mass., January 1973. 9. Princi al Count, ries Receivin Nore Than One Million Tons Car o 1969+ in long tons! Australia Canada Chi le Ecuador 50 8,843 370,06 87,4 3 1958 667,203 482.870 1,678,778 236,005 1960 820,998 1,340,126 2,032,803 300,693 1963 l,069,862 1,156,487 2,420,061 446,211 l965 1,761,279 1,342,227 2,582,181 667,864 1968 1,556,003 1,482,397 3,237,276 1,137,599 1969 1,367,957 2,335 207 4 063,013 1 215,417 Ita Ja an Netherlands Peru 3, 9 93 1 3 g 1958 344,502 7,831 ,164 1,487,364 974,965 1960 309,724 10,990 ,869 2elplrl03 1,166,213 1963 l, 318,S80 13,697 ,778 2,175,861 1,559,606 1965 946,028 17,905 ,485 2,089,097 1,718,617 1968 l,425,120 32,163 ,941 2,421,949 2,261,217 1969 0 32,002 33,558 400 2 737,546 1,768,126 'Panama Canal Company, Annual Re orts, respective years. continued! CARGOAND TRAFFIC TRENDS 103 German Fed. Re 5. Korea 15,4 , 0 1950 150,000 2,905,79B 18,872,799 1,633,050 195B 678,282 3,944,667 24,465,969 1,941,272 1960 574,062 3,913,982 21,171,794 1,989,979 1963 546,885 3,917, '521 25,229,655 2,477, 374 1965 807,377 4,199,502 26,446,294 2,009,792 1968 1,150,503 3,782,512 27 618 128 2,085 378 1969 1,672, 353 3,362 642 rotal Total Total Canal Traffic 0 3, 8'5, 2 0. 3 1958 39,191,649 B1.4 48,124.809 1960 49,957,814 B4.3 59,258,219 1963 51,470,925 82.7 62,247,094 1965 62,527,641 81.7 76,573,071 1968 79,074,603 81.9 96,550,165 1969 82,816;169 81.7 101 391ql32 Data for years 1958 and 1963are included for calculating Note: the percentageof total Canal cargo versustime. These data could not be used for relating GNPto cargo, however, because GNp data for 1958 and 1963 are not avail. able. Gt~pof 12 Princi >al Lar o Destination t:ountries" rni lions 196 U.S. dol ars! Ecuador Australia Canada Chile 21,535 2,109 490 950 ll, 360 628 26,776 2, 371 1955 12,663 791 15,664 31,422 2,848 l960 3,646 982 20,227 40,320 1965 3,990 1,188 22,18l 45,511 l968 4,l47 1,188 24,137 47 554 1969 Ye t.her ands Peru rtal Ja an 0,7 0. 2,435 30,083 l0,637 1955 28,849 2,479 47,995 13,011 1960 37,754 3, 376 76,443 16,414 1965 48,718 3,841 110,813 18,306 1968 58,001 3,916 124 664 l9,247 1969 60 976 German Y» K l, ! ! r' G ,v" 162 7tIe map IS adapted Irom Interoceanic Canal Studies 1970, Report of RAVt'fi 10 NORTft Ofr '.a lslA L the President's I nter- scALE I N saIL Es oeearIiC Canal StLIdV 0 ie Coinrnission, Chapter V I I. X merchants. No canal site away from the Isthmus has a comparable reservoir of labor, or equal facilities in housing, stores, medical facili- ties, or as good a network of highways near at hand. A sea-level canal could be operated by the staff now employed by the Panama Canal Company. The armed forces located at the Canal Zone are available to defend it. To obtain the site from the Republic of Panama will require negoti- ating a separatetreaty and concessions,This may now be difficult, but the possibility of returning the east side of the Zone to the Repubbc, save for a corridor from Madden Lake to Gamboa, would provide com- pensatoryland and a shorter, more direct connection between Panama City and Colon. A sea-levelwaterway along the Logarto-Caimitoroute would make a valuable contribution to commerce anti to the Panamanianeconomy. lt would allow vesselsto transit in lesstime than through the lock canal. It would allow larger vesselsto passthan can possibly be admitted to a lock canal. lt would not become outmoded as a lock canal will that is once diverted to other routings wiH return to me ~sLr!nl~ ai~x theCanal is reopened.For this reason, the President's Commission very muchpreferred a sea-level canal constructed outside the present Canal SE PAR TABOGAIS PACI F I C OCEAN I t'IC Al!!p I ' ilddp ted from I r!tr rr!oe.so/c C,sr!at NtudII.'i t9'0, Revort of RIiuteNos. 14 Contbinedand 14 Separate t!le Pr!'5lder! I'8 I Iltt!r- ooe!trIIo Car!aI Study SCAL EI I!IM II. ES t;omr!!i>> o~!, CI!.!ptr:r V I I, o s 10 Virtute 37, AI,TIBIA'T'TYKE T' !R T'TTEFUTURE /On i so that trafflC m th» exlstlrlg lOCk c'anal would not have tO b4' rnterf U ptecl, P es oPeratlng U Q flag 'd and that, if such a canal were available, they would use it. These we~» companies operating tankers and dry bulk cargo vessels,Points stn ss<~3 that a waterway able to take vessels up to 150 00 tons would save costs in the use of tugs and line handlers. Considerations Hegacclir19 a Bed-Level Cdndt I rom an engineering point of view, there is considerable to he said in favor of constructing a sea-level canal along Route 1.0 if agreement can be reached or> tl>is, There would be no interference with ship movement while construction is gai»g an. 'I'he roUte runs largely through relatively unsettled countryside. The elevations are quite modest A sea-level canal built along any of Routes 10, 14S or 1 lC would br able to make use of equipment alreadylocated at t.heZone. This v auld save duplicating equipment and housing. llarbor facilittes are hand!ly present ThePanama Railroad supplies trans-isthmian transportation. I uel suppliesare located at the Canal tern>inals.Hotels are situated nearby. An angle that, hasnot been sufficiently examinedas yet is the eco- Iopcal one of the effectsof buildinga sea-levelcanal across the Isthmus, More studieswill bc neededbefore assurancescan bc given that openinga sea-levelwaterway will not afforda seriousopportunity for transferof hiota fram one aceanto the other,or allow sealife from the Pacificto moveinto the Caribbeanwith its manyresort areas. Cxiven sufficienttime, andeffort, theseproblems should be solvable. Takenon balance,we feel that, whenthe time comesto enlargethe interoceanicconnection, a sea-levelcanal is a practicalsolution for the long-runneeds of aceanbornecommerce. The insistence, however, of Panamanianleaders on acquiringpolitical control of theCanal routes at the Isthmusand of limitirigUnited States rights an jurisdictionthere raisesprofound questions about the ent>reenlargement plans. Until theseare clarified, there is doubtthat the UnitedStates Government shouldproceed further towarda sea-levelwaterway. lf a sea-levelcanal is to pay for itself, it wouldbe necessaryto maximizetoll revenues,'I'his would necessitate a toll systemthat as- sessedmore nearly what the traffic will bear.' TheCat>al Company hassupported a sea-level project informally. The 'Governorin 1973questioned whether the expenditure of funds for ThirdLocks would be warranted on economic grounds. !Ie conceded that,if a sea-levelcanal mere impossible, hewould favor the Third Lacks.A sea-levelcanal wouldbe ahk to transitth< large naval circ raft NICARAGUA COSTA RICA BOUNDARY CANAL ROUTE 8 'The O CO O O LO C! CI CD ~ E 0 O Lfl Cl O O LD ID CO CD O CD CO Ch CD LD CO LD LD Cl CO LA CV C! Cl C! LD C! O LIl Pl W Q! Ul W Q 4 0 0 C> I CD a Q 'a CI CO C4 N CP'8 LD C! Ul Cl N LA ~ + Q U} Fl L Ql G 0 0 0.+ Ul U G ~ 0 N g G44! >v0 D 0 0 0 4 Il5 Q! mD C 4 The disadvantagesof a Colombian route are its remoteness from sizable habitations, the absence of communications, the greater distance from New York and San Francisco, the lack of facilities of any kind in the neighborhood, and its length of 100 miles. Furthermore, the Gov- ernrnent of Colombia made it clear to the President's Commission that it was not prepared to give the United States unfettered rights and jurisdiction. Table 1 summarizesthe characteristicsof the various routes. A canal constructed outside of Panama could provide an alternat,ive should the Panama Canal become blocked for any reaso~. This would help assurefreedom of passagefor shipping.It would alsoprovide a competitive situation. This could be advantageousto commerce. A disadvantageof building a canalin anothercountry would be the needfor duplicatingconstruction equipment, operating personnel, com- munications,and defenses.Although this might be a reasonableprice to pay for freedomof movement,it would addmeasurably to the cost. Political and financial problems would be multiplied, We think the addedcosts, political problems,and other difficulties that wouldbe involved in procuringland, housing, caring for labor,devel- opingsupply bases, roads, and other essential installations, plus the re- motenessof locations outweighthe advantagesthat areto begained. The Isthmus at Panamacommands the narrowestpassage between the oceans.Its resourceshave been well developed.It is known to shippinginterests. The Republic of Panamaoffers valuable adjuncts in bankingand shipping services, a competentwork force, and the best hotel and residential areas near any of the routes. J V tiaraof substitutingfor the Canalalthough at greatercost. ALTERNATIVES FOR THE FUTURE It may also be arguedthat Panamawould put the tolls up sothat it wouldcost shipping much more to usethe Canalthan it hasbeen doing in the past. This could happen. On the other hand, Panamaniansare awarethat, if tolls are put up too high, cargowill find other waysof moving to destinations. Traffic will shrink, ToHs revenues will decline. The Canal, as we have remarked before, is in the internationalmarket; place. Its administratorshave to keep tolls at a point wherethey will attract, not repel, shipping. It is often argued that some foreign power inimicable to United States interests would grab this strategic crossroadsif the United States moved out. This again is conceivable.On the other hand, United States armedforces are not far away from the Canalat any time. It is hardly likely that nationalist forces within Panama would look with favor upon foreign elements seizing what they would have gained. Selling the Canal to Panama is a possibility. We do not recommend this as a first choice, but it may be worth considering. This would get the United States out of an increasingly uncomfortable position. We do not believe the waterway would be turned against United States ship- ping, that the toll rates would go far out of line with what the market will stand, or that the operators would tolerate a hostile foreign power moving into the Zone. Should the United States decide to sell the Canal to Panama it is conceivable that the resources of the World Bank could be called upon to assist in the operation and improvement of present or foreseeable facilities. With the importance of other modes of transport increasing, this may be an alternative worth considering. 7. Other ~nsfer Possibilities Trans-Isthmian Pipeline It has been suggestedthat, rather than laying out moneyfor a larger canal, businessshould be encouragedto constructa commercialpipe- line across the Isthmus with tank farm's and suitable deepwater termi- nals located at each end. This would then permit supertankers to bring oil to the Isthmus, have it pumped to the other side, and be loaded there for carriageto refineriesin the Caribbeanor be tankeredto East Coast ports. Twelvemillion tons of petroleumwent through the Canalfrom the Atlantic to the Pacific in 1973; 10 million tons, in the opposite direc- tion. The tankers provide substantialbusiness for the Canal.Shipping much of this acrossthe Isthmusby pipeline would relievethe Canal of that much traffic and cut down on one of the principal sources of large shipping.This appears to bea possibilityif trafficbecomes heavy enough. Pipelinetransportation of oil acrossthe Isthmuscould be a viable pl! g'QQ g gL ~ 4$!+j Q AU~ g ~ IAJIU Slurry and Moving Belt Transfer Thought also springs to mind of the possibility of moving quantities of coal and ore across the Isthmus by slurry process from deepwater terminals at Colon and Balboa.' Problems can be seen in the costs of unloading cargoes at one side of the Isthmus, reducing them to slurries, storing them, reconsolidating them at the other end, and reloading them for shipment in the other ocean area. Generally speaking, the commodities that couM be transferred as a slurry or by moving belt can be gotten to destinations more cheaply and expeditiouslyby continuous ship movement rather than by trans- shiprnent. If there were no interoceanic canal, such a method might be more attractive. If the coal and ore carriers turn to very large vessels, transshipment may become preferable, in some instances, to diversion around the Capes. Land- and Mini-Bridge Systems The introduction of special unitized trains for carrying modular «n tainers across the United States, with schedules keyed to arrival and depart,oredates of expresscontainerships across the Atlantic and the AI.TKRNATIVES FOR THE FUTURE l75 Pacific,with competingrate schedules,is offeringfresh competition to the PanamaCanal. Europeanand Asiantraders are beinggiven an alter- nate means of moving high-priority cargoes to markets abroad. The land-bridge system aims to improve delivery times to third conti- nents on the far side of the Americas. This has not yet established a clear ascendancyover seatransport, however. Shipping companies have been meeting the challenge with new, faster containershipsthat can makethe run between Europeand Asianports in approximatelyequiva- lent times. Delays in ports, and the still relatively slow operation of through transcontinental freight trains, are impedingthe progressof the land-bridge. Mini-bridge trade by comparison,involving shipments betweenJapa- nese and East Coast Umted States ports, and betweenEurope and West Coast North American destinations, has been making some headway with delivery times two or more days faster than by all-water transpor- tation, This innovation, coupled with the increase in trucking on the Interstate Highway system offers flexible opportunities for overseas commerceso long asrates are held comparable.' This raises a query whether it would be to the nation's advantage to improve the rail system with Government subsidiesfor new roadbeds, rolling stock, and faster schedulesrather than investing comparable dollars in further canal construction. In a sense, the Panama Canal has contributed to the demise of the railroads in the United States, just as it, is now deterring the construction of large ships by imposing Panamax- size dimensions upon some builders. A large investment of capital in the nation's rail system would strengthen the economy.It would providejobs for the unemployed.It would improve the nationaltransportation system. It wouldaid se- curityin a timeof emergency.A revitalizedrail systemcould aLso help conserveenergy supplies by stimulatingmore efficient meansof trans- portation.The timemay be ripe,therefore, for theinjection of large amountsof capital not only in newport systems,but in the transconti- nental rails as well. Whateveris done, and this becomesa matter for nationaltranspor- tationpolicy, the UnitedStates will wantto continueits supportof the merchantmarine to enable U.S.-flagshipping to compete with foreign companies,and to havean adequatefleet for usein timeof national emergency.As long asthe nationmoves over 90 percentof its overseas commerceby water,it will be indispensableto have a largemerchant fleet and an interoceaniccanal. Considerationsof savingenergy also arguein favorof keepinga shortwater sea route in thepicture of global transport. Summary Amongthe alternatives discussed in the preceding pages, we conclude va'c.apts. ~J% Kt4. fix! Llu~~~ Ail.Mt. kp 'pd'v~~a~~~ their country. Discontent over the situation was a factor in the riots that occurred near the Canal Zone in 1958 and 1964. Panamahas benefited from the presenceof the Canal in numerous ways.It hasbecome a centerfor internationalbanking, transport, and communicationsConstruction activity has beenbooming with the pres- enceof foreign capital.More than 40 percentof the foreign exchange earningsand nearlyone-third of its grossnational product can beattrib- uted to the existence of the Canal. Its national income has more than doubledin the pastdecade with a growthrate of closeto 8 percenta year." Grossinvestment as a percentageof gross domestic product is higherthan that of Mexico.Its percapita income is oneof thehighest in Latin America. ' F'ol!owingdiscussions of the situationin Panamaat the Organization of AmericanStates and at the UnitedNations in 1964, as well as betweenthe partiesthemselves, President Lyndon B. Johnsonagreed to talks between the two countries to remove the "causes of conflict relative to the Panama Canal." An announcementof five "areasof agreement"on a new treatyby MH.Ll 92 +~5stUXrg'~ g p a fixed terminal date for a new treaty; ! the Canal area to be inte- gratedwith the rest of Panamaon anorderly basis; ! fair andhelpful treatment to all employees who have served the Canal. The parties, in addition, stated that they were in agreementon main- taining United States armed forces and facilities at the IsthmtLsunder a status-of-forces agreement; that studies should continue on a sea-level canal which shall be open at all times to the vesselsof all nations on a nondiscriminatory basis; and a separate treaty to be concluded for a new sea-level canal. " Three draft treaties came from the negotiators in 1967: one for the existing canal; a second for a sea-level canal; the third for mutual de- fense. The first called for joint administration of the Canal, increasein annuity payments, division of toll receipts, transfers of land to Panama, application of Panamanian law in the Zone under a progressivesystem, and termination of the new treaty in 1999. The second provided for constzuction and operation of a sea-level canal with joint administration for 60 years from completion of construction, followed by transfer to the Republic. The third document would have safeguarded United States rights to defend the Canal during the life of the treaties, but with Panamanianparticipation. " The Government of Panama took no steps to ratify these drafts. Instead, it rejected them summarily. When the contents became known in the Congressional Committee on Merchant Marine and Fisher- ies, it reported that the draft terms were "unworkable as well as con- trary to the best interests of the United States." It added that: It must be understood by all interested parties that the Congress looks with disfavor on such disruptive treaties and is adamant in its opposition to ceding United Statessovereignty and jurisdiction over the Canal Zone... This plain-speakingsignaled that, if the Executivewere to submita treaty along these lines to the Congress,it would face rough going. Although the Senateis the body with constitutionalpower to give consent to treaties, the membersof this body would not overlook strong opposition in the other House. Moves During the Nixon Administration President Richard Nixon authorized negotiations to resumewith the Republicof Panamawhen he cameto office in 1968.These were con- tinued until just beforethe 1972presidential elections. In his 1972 ForeignPolicy Report, the Presidentindicated that the United States wishedto developa matureand stable partnership with its LatinAmeri- 17' MARITIME COMMERCE/FUTURE OF THE PANAMA CANAL, can neighbors ' Little progresseras made, however, during the ensuing year. Changing lnternationat Scene At a specialmeeting of the United Nations Security Council con vened at Panama City in April 1973, United States Canal policy was criticized. The country was accused of colonialisrn in retaining control of the Zone. It was called upon to conclude a new treaty with Panama When the vote was taken on a resolution criticizing United Statespol icy, 13 of the 15 membersvoted with Panama.The United Kingdom abstained. The United States representative was forced to cast a veto to prevent adoption of the resolution. Although AmbassadorScali argued that the action was inappropriate in view of the continuing negotiations between the parties, and reaffirmed the desire for a new treaty, his views were brushed aside. In the closing moments of the meeting, the Panamanian delegate warned that his Government was prepared to go to the U.N. General Assembly where no veto couM prevent the passage of a resolution. Several representatives indicated privately that they were unhappy with what was taking place, and hoped the United States would main- tain its administration of the waterway. But they felt obligated in prin- ciple to support the position of their host. The action was a diplomatic coup for the Republic.3 Shortly after being sworn into office, Secretary of State Kissinger signaled his desire to open a "new dialogue" with the countries of Latin America based upon "equality and on respect for mutual dignity." ' Ambassador Kllsworth Bunker was designated to pick up the talks with the Republic of Panama. Panama City Statement of Principles A new attempt was made to make a show of progress when Secretary Kissinger journeyed to Panama City in February l974 to sign with Foreign Minister Juan Tack a Statement of Principles to Serve as Guide- linesfor Negotiating a New Treaty. In an 8-point Statement, the United States promised to terminate the 1903 treaty and to replace it with a new instrument abolishing the concept of perpetuity. It agreed to Pana- maniansovereignty at the Canal Zone, to joint participation in the operation and defenseof the Canal,to assurejust and equitable benefits to the Republic. It also agreed that at a terminal date full control would be transferred to Panama,although no date for this was specified. For its part, the Republicof Panamaagreed to grant the United Statesthe right to useland, waterand air spaceneeded for the operationof the Canal and for its protection, and to agreeupon measuresto enlargethe Canal's capacity. In remarksfollowing the signing,the Secretarysaid that restormg z xecunve aalu me congress over me counuy s xoreqpz poiscy. Failure to conclude a new treaty will be troublesome. Panamanian demands have pried open a lid to a Pandora'sbox. The United States Government has been put in a position where it can be condemnedif it does not agree with these Principles. It can be faced with another confrontation in Panama or at the United Nations if it reneges on the terms of the Statement. Thirty-five members of the United States Senatesigned a joint reso- lution in the spring of 1974 declaring that the PanamaCity Principles constitute a "clear and present danger" to the riPts and security of this country. This more-than-one-third of the Senateplaced the Govern- ment in a tight corner. Not all of the signersmay remainin solid opposition ta the Government if a new treaty is laid before the Senate. Somemay shift positionsif the Presidentor his Secretaryof Statemakes a strong casefor a new arrangement.Neverthe/ess, the poli tical lines are being drawn and notice has been served that many members of the ment to be concluded before nationalist sentiment witliin panama taxes matters out of the hands of diplomats. Statesmanshipmust find a for- rnula that gives satisfaction and security to both parties so that the Canal will not become a football of power politics, as Suez was between 1967 and 1974. Joint Administration The principle of joint participation in the administration of the Canal provided for in the 1967 draft treaty was alluded to in the 1974 State- rnent of Principles. The parties have not come to agreement as yet, however, on precisely how responsibilities shall be handled. Adminis- tration of numerous civil functions can be placed in Panamanianhands fairly shortly. What seems not to have been resolved are such questions ALTERNATIVES FOR THE FUTURE 181 as police and taxing powers, the application of panamaanamanian ian 1 aw to to disputes and liabilities concerning rights of passingvessels, and the like. Unless there is agreement upon these matters, incidents may flare into tests of strength. Good faith and bona fide efforts will be needed in the interim period. The relationship between the Republic of Panama and the United States has fostered enrollment of Panamanian students in U.S. univer- sities. This has contributed to the upgrading of Panamanian partici- pation in the Canal organization as weH as affecting the Republic's financial, business, and governmental operations, Looking toward the possibility of joint administration, it might be advisable to promote this interchange further. E:xpansion of Capacity At, this point it is not clear what should be done to expand the capacity of the Canal. The United States is understood to havesought to retain an option to initiate a sea-level canal until the year 2000. Panama, on the other hand, is reported to have pressed for a firm commitment that work will be commenced on larger locks or a sea-level waterway within a short time, or that the United Statesshall forfeit, its rights in this respect.Nitb worldshipping at its presentstage of uncer- tainty, aetio~ cannot be taken until it is clearerhow traffic will de- velop. From the presentoutlook, it appearsto us that nothingfurther should be done at this time to expand the capacity of the Canalbeyond its presentlimits. Ke incline to the view that the number of vessels seekingtransit will not exceedthe limits of its capacitybefore the turn of the century, if then. Oefense of the Canal Panama'snegotiators are reportedto be seekingto haveUnited Statesforces relegated to actingonly when calledupon by Panamato do so within the isthmus,and to havetheir rolelimited to defending the Canalfrom externalaggressors. %ith the Panamaniandefense forces limitedto the 6,000-manNational Guard, it is fearedthat thismay not be sufficient to deter a foreigninvasion or to preventacts of sabotage or guerrilla.-typeattacks upon the Canal. The Panamanian position is understandablefrom the point of view of a smallindependent power, jealousof its sovereignty,and eager to steerclear of greatpower rival- ries.Much is at stake,nevertheless, in view of theglobal importance of the interoceaniclink and its strategicplacement. Utmost care must be exercisedin this spherelest a falsestep open the Canalto a Trojan horse vulnerability. At theleast, the principle ofmutual defense, asembodied inthe NATO agreements,isneeded to safeguard theinterests ofboth parties here. view of its Isthmian position. The United States is understood to be amenable to increasing the annual payment to Panama to approxi mately $25 million through a royalty on tonnages.The level of pay- ments proposed is based upon the "estimated maxirnurn net revenue that the Canal could produce as a result of toll increases which would not seriously limit traffic growth." We have two thoughts on this. Tolls should be devoted first to cov. ering the cost of operations,paying off capital investment, and pro. viding a fund covering necessary improvements. The United States in. vestment in the Canal, in terms of real property, is somewhere on the order of $1 billion. The unrecovered costs today are $317 million of the original appropriations for Canal construction, plus $400 million interest costs borne by the United StatesTreasury on these funds prior to 1951 when the Canalwas placed on a self-sustainingbasis. The $400 million has now been written off in order to minimize the interest- bearing debt of the Canal Company. CongressmanRobert L. Leggett Democrat, California!, Chairmanof the Houseof RepresentativesSubcommittee on the PanamaCanal, said at the HearinginJuly 1973: "My own view is that any paymentsto Pan- ama respectingthe canal,both in equity and in a goodeconomic sense, ought to be generated out of the canal itself." ' Someincrease in toll rates can be justified, not having beenraised since 1914. The Canal Company is currently urging an increasefor other purposes. But the Canal operates in the international market- place.If its ratesare raised too high,shipping will be encouragedto go in otherdirections. Traffic will drop off. Therewere objections raised to the 20 percentincrease proposed in 1974 by someliner companies engagedin intercoastaland foreign commerce.Payments from Canal revenues thus have certain built-in limits. The positiontaken by the United Stateshas been a generousone. SecretaryKissinger's signature to the PanamaCity Statementis a bene- fit to the leadersof the PanamanianGovernment in view of the fact that thepoints made there have been among the principal goals of local nationalistelements. A monetaryfigure could be put uponthem. We do not recommendthat this be done.We do think, however,that the combinationof the increasein paymentsoffered and the signedState- ment arein themselvesa justand equitableshare of the benefits. Economic Value of the Canal In the courseof analyzingUnited States policy alternatives for the present canal, one should keep in mind that the economic value of the PanamaCanal is finite.The economic value of majorenterprises, ac- 7 C7 will doubtless be a factor in Government decisions. The presence of U.S. personnel at the Zone with accompanyingcom- munications facilities gives the United States an eye and ear useful in monitoring Latin American affairs. Considerationsof these facilities wiH also be of consequencein future decisionsand this. too, hasnot been addressed here. The United States should keep the treaty options open which it has with other countriesfor possibleconstruction of an interoceaniccanal in the event continued tenure of a canalat Panamabecomes impossible for any reason. The Panama Canal is valuable to the commerce of numerous coun- tries, in additionto that of the United States.British, Japanese, Li- berian,Norwegian, German, Greek, and Panamanianshipping, to men- tion but a few, areheavy users of the Canal.Some provision should be madefor the interestsand needs of these countries, as well asof those that aremost heavily dependent upon the Canalfor theirimports and exports,to be representedon a regularizedbasis. We do not suggestthat theyshould participate in thecontrol of theCanal, but there should be ways in which their views can be heard. J 7 K havea maturepartnership of equalsin a hemisphericsystem of mutual collaboration. As a former President of the United States said in addressing the nations of the American hemisphere: "... our unfulfilled task is to demonstrateto the entireworld that man'sunsatisfied aspirations for economic progressand social justice can best be achieved by free men working within a framework of democratic institutions." Ke have attempted in precedingpages to estimatethe costs and benefits derived from the operation of the Panama Canal. Political benefitscannot be setdown in dollars,but they arenevertheless real. Relationshipswith the Republicof Panamainvolve a complexlinking of political, psychological and economic elements in the context of a Latin American political process. ' ALTERNATIVESFORTHE FUTURE 185 A p~nershipfounded upon principles of equality, justice md f '- ness,and operating within the boundsof nanational ion, h emispheric ' h and internationalinterests, can afford an enduring link between theinter- estsof the Panamanianpeople the United States a s, and an th e community of nationsinterested in theinteroceanic passage between the Atlantic and Pacific Oceans. CHAPTER SEVEN FOOTNOTES 1. Shippingand Canal Operutions. Hearing before Subcommittee onPanama Ca- nal.Committee on MerchantMarine and Fisheries. ' s. House ouse o f epresentatives. R t 93rd Congress,1st Session, July 17, 1973,pp. 6-7. 2. IrnprovernentProgram for thePanama Canal. Prepared byA.T. Kearney EcCa., Consultants.Panama Canal Company. Washington, 1969. 3 Seestatement of AlbertE. May,Vice President, American Institute of Mer- chant Shipping.Hearings, op. cit pp. 46-47. 4. Seetestimony of GovernorDavid S. Parker. Ibid., pp, 33-34, 41-42. 5. SeeAdditional InteroceanicCanal Facilities, Hearing before the Committeeon InteroceanicCanals, United States Senate, 76th Congress,1st Session, on S, 127 and S. 2229, May 16, 1939, 6. SeeProceedings of the AmericanSociety of CivilEngineers, Vol. 73, No.2, February1947. Papersby MilesP, DuVal,"Me MarineOperating Problems, PanamaCanal, and the Solution," pp. 161-174;J.G, Claybourn,"Sea Level Plan for the Panama Canal to Provide Maximum Saf'ety and Unlimited Ca- pacity," pp. 175-196. 7. House Bill 1517. 93rd Congress,1st Session.Bill to IncreaseCapacity and Improve Operations of the PanamaCanal, January 9, 1973. Seeremarks of Congressman Flood on introduction of his bill in CongressionalRecord, January 29, 3973, p. H539. Senator Thurmond's bill, numbered S. 2330 was introduced into the Senateon August 2, 1973. SeeCongressional Record, Vol. 119, No. 125, August 2, 1973, pp. S15406-15408. The Deep Draft plan will be found in Interoceanic Canal Studies, 1970, pp. 75-78. 8. Interoceanic Canal Studies, 1970, p. V-134. 9. Hearing, op, cit., p, 61. 10. See testimony of Alfred E. May, quoted above, p, 54. 11. The Panama Canal Pilots Associationhas supported the Third Locks plan snd opposes a sea-level canal on the ground that the latter will eliminate a fresh water barrier between the oceans. See letter to the President of the United States, members of the Congress, and others inserted in the Congressiona Record, November 15, 1973, 93rd Congress, 1st Session,Vol. 119, No. 176, p. H10092 by CongressmanDaniel J. Flood. 12. Hearing, cit. supra, p. 87. 13. See hearing, cited above, p. 70, Governor Parker subsequentlystated that he definitely favored the sea-level canal "at the appropriate time." 14. Interoceanic Canal Studies, 1970, p. 82. 15. Hearing, op. cit., p. 47. 16. Interoceanic Canal Studies- I 970, p. 107. 17. Ibid., pp. 85, 87. MARITIME COMMERCE/FUTURE OF THE PANAMA CANAL 186 A pipelinenow extends across the Canal Zone to serveCanal needs This is not 18. l e enoughto handleoil in commercialquantities. On the t ansportationof oil see J B Lassiterand J.W. Devanney III, "Economics of Arctic Oil Transportation.' Schiff und HaffenSonderheft, November 1970, p. 18,See also interoceanic CanalStudies 1970, pp. IV-113 to IV-118. 19. See"Supertanker Loads Ore Slurry at Sea."Ocean Industry, August 197, 20. See"Minibridge in Focus," "A Land Bridge The Myth and the Reality," and "Mini-BridgeForum," RailwayManagement Review, Vol, 72, No. 4, 1972 «iso "The Mini-Land-Bridgeand PanamaCanal Traffic." Preliminary Draft Re- port No, 12, by Lirn H. Tan, M.I.T. SeaGrant Program,Interoceanic Canal Project,Cambridge, Massachusetts, May 1974. 21. Text in 33 Stat, 2234. The treaty is analyzed along with later agreements in Norman J. Padelford, The Panama Canal in Peace and War. New York: Mac- millan, 1942, Chapters 2 and 3, 22. See The New York Times, August 6, 1957; April 20, 1960; Department of State Bulletin, Vol. XLVIII, No 1232, February 4, 1963, p. 171. Some efforts were made to promote a seizure of the Canal at the time of the Egyptian nationalization of Suez notwithstanding fundamental differences in the owner- ship of the two waterways, See Norman J. Padelford, "The PanamaCanal and the Suez Crisis." Proceedings of the American Society of International Law, 1957, pp. 10-19. 23. See The Neur York Times, January 10-11, 1964. On political aspects of Canal, see !mmanuel J. Klette, From Atlantic to Pacific; A Netv Interoceanic Canal New York: Council on Foreign Relations, 1968, Chapter VII. Inter-American Development Bank, Economic and Social Progress in Latin America. Annual Report, 1972. Washington, 1973. See chapter on Panama, pp. 263-271. 25 Agency for International Development AID!. Gross National Product: Growth Rates and Trend Data, May 10, 1972. Washington: AID, Office of Statistics and Reports, Table Bc. 26. The Neur York Times, January 10, 11, 1964. For an account of events during and after the Panama riots, see I yndon Baines Johnson, The Vantage Point: Perspectives on the Presidency, 1963-1969. New York: Holt, Rinehart k Win- ston, 1971, pp. 181-184; Public Papers of the Presidents- Lyndon 8, Johnson. Washington: Government Printing Office, 1964, Book I, pp. 121, 144; 219-220; 404-405; Book II, pp. 1163-1165 27. Statement by President Lyndon B. Johnson on Progress of Treaty Negotiations with Panama. White House Press Release, September 24, 1965. 28. The texts of the instruments are found in Iteport on the Problems Concerning the Panama Canal. Committee on Merchant Marine and Fisheries. House of Representatives,91st Congress,2nd Session,1970, Appendices IV-VI. 29. See statement published in La Estretla de Panama, September 5, 1970. Re- printed in Reports on the Problems, cited above,pp. 87-96. There wassome debateon the meaningof the action taken. To some, it seemedin the nature of a "salida politica "~ defiant rejection on political groundsas servingno useful purpose, 30. Report on Problems, cited above, pp. 23-24. 31. Text, in Department of State Bulletin, Vol. LXVI, No. 1707, March 13, 1972> p. 358. See address of Ambassador David H. Ward entitled "A Modern Treaty ALTERNATIVES FOR THE FUTURE forthe Panama Canal." Department of State Bu/letin, Vol. LXVI, No. ]73p, June 12, 1972, pp. 818-822. 32 UnitedNations Monthly Chronicle, Vol. X, No.4, April1973, pp. 15-58, On backgroundof meeting, see dispatches listedin TheNeur York Tirrtes !rIdeg, March 13-16, 1973, 33. Departmentof StateBulletin, Vol. LXIX,No. 1792,October $9, 1973 pp 642-643,Address to LatinAmerican delegations to U.N. General Assembly. 34, Thetext of the PanamaCity Statementwill bel'ound in theDepartment of StateBulletin, Vol. LXX, No. 1809,February 26, 1974,pp, 184-186. 36. The text of the Secretary'sremarks is containedin Deportmentof Stale Bul- letin, February 26, 1974, pp. 181-184. 36. Seeart,icle by SenatorStrom Thurmond Republican, South Carolina! in The Negro York Times, May 7, 1974. 37, Ibid. 38. Departmentof StateRelease on TreatyNegotiations, op. cit p. 6, 39, Shipping and Canal Operations.Hearing cited above,p. 83, 4Q, James E. Howell and Ezra Solomon, The Economic Value of the Panama Canal, International ResearchAssociates, prepared for the PanamaCanal Com- pany, December 1973, pp, 29, 32. The dollar values do not account for short- terrn effects which might result from a sudden large toll rate increase,For a discussion of these effects, see Ely M. Brandes, The Economic Value of the PanamaCanal: An Addendum Concerningthe Short 1'erm Value o f the Canal, also by International Research Associates for the Canal Company, March 1974. 41. Klette, op. cit., p. 132. ~ ~ »~~ Yi»i~i@~ Mocaa vi a,sic v~tgg Ugpyeen go~ gag y~g rjlvll!~a intermediatesize general cargo liners, containerships, refrigerator ves- sels,other specialized ships, bquid and dry bulk carriersable to fit within the locks. 7. Asthe numbersof Panamax-sizedvessels increase, and t"e»'P buddingindustry turos out morevessels exceeding the dimensions« the years has amount.a xo vvn q~.~ IVV rvi~»~vi ' ~ ' ' ' ~ ~~ ~r ~~~ <~AAMA CANAL sourcesincluding tolls on UnitedStates Government owned vessel havebeen approximately $1.5 billion. The United States Government is thusrurining an unrecoveredexpenditure of nearlyone billiori doll~ on theCmg ent m~. Thh needsto be bornein mind whenconsid- eringthe possible construction of additionalfacilities, or of turningthe Canal over to others. Toll Strategies 14. Thepresent toll systemhas functionedwell for the lifeof the Canal.The originalPolicy of chargingCanal users only the costof providingservice has been instrumental in furthering the usef h,e~ economicbenefits of the Canal operation. 15. RecentinQation, coupled with desiresto recoversome of the original investment in the waterway, has necessitated a toll in Theproposed 20 percent rise will not curtail iise of the Canalhy shipping.Inflation may make additional toH increases necessary. 16. A variablepricing system designed to meetthe competitionof alternatemodes of transportationwould generate additional revenues, Butthis would require more paper work to administer,tempt shippers to file falseor incompletereports of cargo,and be difficult to enforce. impactof Land-and Mini-Bridges 17. The land-bridgeoperation, employing unitized train-loads of containerson thetranscontinental railroads across the UnitedStates synchronizedwith ship arrival and departure dates, offers a newcom- petitivechallenge tothe Panama Canal. Thus far, this does not appear to be affecting Canal traffic. 18. Themini-bridge concept, involving shipment from an overseas continenttocities on the opposite coast pf the United States, has up to now'been more costly than all-water shipment. It caneffect a small savingoftime if connectionsareperfect, Rising ship operating costs andtoll increases areimproving the competitive position of the mini- bridge. Third Locks Plan 19. Weconsider a project to construct a third set of locks economi- callyunjustifiable. Theiroperation would require the pumping ofsea waterinto Gatun Lake to provide adequate lockage water. The cost of pumping,coupled with the manning andmaintenance costs,would necessitatea.the in tolls that w'ould undermine possible economic ad. vantagesthatcould be drawn from the use of largerships. Any lock typefacility wiH ultimately impose limits onthe size of ships capable of transiting.Newlocks would not make the panama Canal any easier to defend.Since the locks would betoo small to accommodate thevery largeaircraft carriers ofthe United States Navy, they would contribute littleto national security. CONCLUSIONS Sea-Level GarsalPlans 20 Recoveringthe costs of constructing a sea-level canal, and paying just and equitablecompensation to the Republicof Panamaout of tolls cannot be assured at this time, even with projectedincreased traffic There are manyunpredictable cost elements involved in sucha course, eluding acquiringprivately-owned lands, right of-waypayments to Panama, and others. 2g. A saturatedPanama Canal, or a massiveshift to verylarge ships, wiii not in itself be proof that a sea-levelcanal will be economically justified. Governor David S. Parker anticipated this when he said a sea-levelcanal "sometime," when the time is right. 22. It is not clear that a sea-levelcanal will pay for itself if it is ready by the year 2000, although it is possible that by that time traffic demand will be sufficient to justify the investment. 23, It may be that a sea-level canal will turn out to be so expensive that it would be better not to attempt to build it,, even when the Panama Canal has aH the traf'fic it can transit. Meantime, we favor retaining the present Canal. 24. A sea-level canal will approximately equal in cost two nuclear aircraft carriers at today's prices, and might reduce somewhat the need for a two-ocean Navy. If the Presidentor the Department of Defense were to say that a sea-level canal is needed on grounds of national security, this would carry impressiveweight with the country. 25. The country may decideto build a sea-levelcanal even though it is not economicaHyjustified, but is requiredfor defensepurposes. The State and DefenseDepartments will haveto determineif unrecoverable expendituresare balancedby political.e., prestigeand influenc~nd defense considerations. 26, Should constructionof a sea-levelcanal be undertaken,a track acrossthe Isthmusjust to the northwestof thepresent Zone appears to be most desirable.Building in this areawiH not interferewith the operationof the presentCanal. A sea-levelwaterway built away from thepresent canal can be built without the necessityof achieving high capacityinitially. It canbe enlargedin stagesto accommodateboth moreships and larger ships. The present Canal would remain available duringand after construction of the new facility as a backupin the eventof slidesor otherengineering problems. The fresh water Gatun Lakeneed not be destroyedwith aH its recreational,electrical power, andmunicipal uses. A canalin this area will probably beless costly to construct, than if built elsewhere. 2'l. A sea-levelwaterway separated from theoriginal canal but near existingdefense facilities will be relatively easy to defend and make it moredifficult to disrupttransiting operations atboth canals. Construc- 192 MARPPiMECOMMKRCE/FUTURE OF THE PANAMA CANAL tion north of the Canal would entail acquiring more land, but in this arearelatively little developmenthas taken place. Furthermore, once a new facility is completed,operations can be consolidatedin the island between the two canals, freeing territories on the east bank of the presentCanal which are of considerableeconomic value, for return to Panama,if this is deemed to be desirable. Stay with the Present Canal Indefinitely 28. Construction cost estimates and forecasts of economic benefits obtainable from a sea-level canal are only approximate at this time These imply that a sea-level canal may never be desirable. It is con ceivable that no major new facility should ever be undertaken and that the present Canal should be maintained indefinitely, even if traffic demand exceeds its capacity. A New Treaty 29. Treaty relationships with the Republic of Panama need to be modernizedwithin the context of a new hemisphererelationship. A treaty alongthe generallines of the drafts referredto the governments in 1967 will cover legitimate aspirationsof the Panamanian people while preservingthe indispensableneeds of the United States for a free and open canal available to the use of all nations on a non-discrimina- tory basis.The treatyshould endorse the principle of the Canalbeing dedicated to the advancement of commerce. 30. Improved relations with Panama are likely to be achieved throughan increasedrole for Panamain the Canalenterprise, as well as addedeconomic benefits that are fair and equitable. 31. Some civil functions can be transferred to Panamanianadrninis- trationshortly. Portions of the Zonenot neededfor the operationand defenseof the Canalcan be returnedto the Republicon a piecemeal basis.Construction of a sea-levelcanal along an axisnorthwest of the present Zone would allow transfer of activities to what would amount to an islandbetween the two waterways.This wouM permit most of the land,towns, ports and installations lying to the eastof the existing Canalto beturned over to the Republicof Panamaif this is desirable. 32. A joint councilor commissionto advise the governments on stepsto extend the capacityof the Canal would afford a routine basis for consultationand exchangeof views. 33. UnitedStates armed forces are neededfor the defenseof the waterway.A separaterights and status of forcesagreement shouM be concludedthat will assure freedom of actionto takenecessary steps to protect the Canaland to defendit againstexternal attack. 34. Otherprime user nations should be drawn into a treatyrelation- shipto afforda regularizedbasis for theexpression of their needs and interestsin the useof the waterway. howgreatly the PanamaCanal has facilitaQB world commerce, asiu wry thisinternational relations and understandings. It isessential that an out- wardlooking view be preserved inhandling Canal affairs inthe future. INDEX Ail ClglHIPutl ill gj 140, 151, 183 Alaskan oil, 174 See also Pipelinee! Balboa Harbor, 37, 110 Alternatives, future, 151-187 Balboa Heights, 23, 27, 30, 31, 42, 43, economic value, 182-183 110, 161 handling, 154-175 See also Headquarters3 construct Third Locke System, Baxter, RichardR., 41 155-161 Beamsof transitingvessels, 65, 106 keep existingCanal, 154-155, 192 See also Dimensions! otherpossible routes, 169-172 Benefits,Panamanian share, 182 sea-level canal in Canal Zone, Boardingof vessels,Canal officers, 27 165-169 Boczek, BoleslamA., 72 sea-level canal from Logarto to Brandee,Ely M., 187 Puerto Cairnito, 161-165 Bulk commodities,78-79, 89, 143 sell Canal, 154, 172-173 principalgroups transiting Canal, 114 transferpossibilities, 173-175 superehipscargo,95, 108, 159 modes of shipping revolution, toll increase, 133 151-154 Bunker, Ehnvorth, 178, 180 changingimportance, 152 costsof enlargingCanal, 153-154 politicaluncertainties, 152-153 Canada,commercial trade, 72, 74 national security, 183-184 exportsand imports, 77, 78 related treaty issues,180-182 flagtransits, 52, 56 summary, 175-176 Canalbuilders, 25 treaty agreement,176-180 Canaloperation, interruptions, 25 Seealso Transiting, Panama Canal! See also Treaties! Americaninstitute of MerchantShipping CanalpQots See Pilots, Canal! CanalPilot's Association, 38 AKMS!, 133, 155 197 ~ !!+Q!UX!VV! I J>! Capeof GoodHope, 5, 6, 9, 13,14, 22, 117 81,94, 124 slurry transfer, 174 CapeHorn, 4, 5, 19,94,117, 126 Codeof Federa/Regulations,40-42, 129, Cargomovements, 46-47, 189 149 distributionof, 76-77 Cokeshipments, 78, 83, 114 principalCanal trade routes, 74 Colombos,C.J., 72 tonnagesand percentages, by,62 Colon,23, 158, 161, 164, 174 Seeaho Cargo, traffic trends! Cargo,principal items of Canal, 84 Commercial ocean transits CargoProjections, 90, 92, 93 See Oceanshipping; Ship traffic pat- analysesas a svhole,102 terns! Cargo,traffic trends, 74-104 Comparativedistances via Canal, table, 6-7 generajcharacteristics, 75-83 Computerprogram, Least SquaresCurve importanceof canal,75-77 Fitting, 87-88 leadingcountries, origin and des- Congress,U.S. Houseof Representatives, tination,77, 78 predommanceof U.S.-Aaia trade, Committee on Merchant Marine 77-81 and Fisheries, 72, 149, 177, 186 PanamaCanal Act, 1912, 126-128 +FIJI VlllllJlVV%V vs' 4 %$IlU44lg~gggg ~g ~ca I.Itrem or 5%8te, DP5, 156 12, 125, 135, 149, 185 Departmentof the Treasury,55, 131 toll rates, 127, 137 annuity paid Panama Republic, views on treaty plans, 119-180 132-133, 138, 149 Consumerssurplus, 135, 139, 145 Depreciation,of Canal,132 Containerships, 11, 14, 15, 43, 45, 51 Depthlimitations of porta,69, 71 57-61, 62, 105, 106, 108, 109, Devanney,J.W., 186 113, 114, 125, 145, 151, 175, 188 Dimensions,rnaximurn vessel, 31, 106, increased traffic of, 67-69 157, 189 shipson order, 69 beams, 65 Sea-Land I ines, 55 length of Canal, 38 T.S.S. Tokyo Bay, 31, 33, 43, 129 "Pamunax," 43, 189 Continental Divide, 23, 35, 37, 161, 171 restrictions imposed by lock cham- topography,165 bers, 105-106 Contractor's Hill, 35 Distance savings, of Canal, 1, 4-9 Control and jurisdiction, 180 charts, 6-7 Costa Rica, 161, 162, 168, 169 See also Advantages, Maritime! Costs Dock strikes,15 anticipated changesin Canal Com- Draft, maximum, 42 pany, 1975, 132 in lock chambers,70 Canalenterprise, 189 restrictions due to lack of water, 117 enlargingwaterway, of, 153-1 54 Drewry, H.P., 72, 125 operatingexpenses, 130 Dry bulk cargo,2, 19, 21, 45, 51, 57-61, Costs comparison, 22 65, 69, 70, 106, 114, 117, 167, 188 fuel mnsumption, 11 Du Val, MilesP.,40,185 land-bridgesUs Canal routes, 17 Dy ui Pacific, 45 mini-bridge UsCanal routes, 17 oceanshipping Us air transport,19 oceanshipping Us rail transport,15 Ecologicaleffects of Canal, improve- valuetrade transiting Canal, 2 rnents, 119, 167 Seealso Toll charges! Third LocksSystem, 159, 160 Cost of transiting, 71 Economic ResearchAsaociatee ERA!, See also Toll charges! 94, 100 Cristobal, 23, 27, 30, 31 Cargoforecast, 94, 113 See also Headquarters! Economic value, 182-183 Crude oil carriers, 19, 43, 83, 151 Economiesof scale,14, 19, 189 Seealso U.S. crudeoil imports! Energycrisis, 4, ll, 21, 63, B9,91, 114, Cucaracha Slide, 26 193 Cut See Gaillard Cut! Engineers,chief, 39 Excavations,Canal, 131 nuclear, 169 Darien Peninsula, 1 61 DeepDraft Plan, 157, 164, 170, 185 Deepeningprogram SeeGaillard Cut! Fair LaborStandards Act of 1974,131, Deepwaterterminals, 13, 14, 19, 62, 81, 144 Finances,Canal, 129-133 105, 152 risingcosts of operation,! 3!-132 constructionof, 95-96, 173, 188 sourcesof Company income, 129 Defense,Canal, 181-182, 190, 191 supportiveservices, 129 Delays See Canal operation! 1 Deepenirrg Program,118 Canal builders, 25 speedswithin, 38 opening voyage, 25-26 suctionfram vesselmovement, 39 toll system, 126-129 widening,37, 115, 116 traffic statistics, 46-47 GamboaReach, 24, 31, 35,37, 108, 109, H.M.S. Queen hoary & Queen Elizabeth, 164 106 Gasturbines, 69 Howell, James E., 187 tanker,T.S.S. Universe Japan, 68 Humboldt Say, 161 Gatun, 31, 43 Hydrologicalsystem, 24, 35, 106-108 Third lockssystem location, 157 Gatun Dam,23, 108 GatunLake, 23, 24, 30, 32, 105, 109, Improvementsto Canal,future, 40 119,124, 160, 161, 165, 189, 190, capacity extension, 115-121 191 lockagetimes reduced, 121 speedswithin, 38 navigation conditions, 119-120 waterfor lockage operations, 35, 108, scheduhng,1 20-121 117 water supplies,additional, 117-119 GatunLocks,23, 31, 35, 37,38, 119 Irurpectionof vessels,by Canal officers, timein transiting,31, 108,109 27 view of, 32 certifiedpapers needed, 41 "Gencom," 18-20 Interest,operating expenses, 130, 132 Generalcargo, 2, 19 Inter-Governmental Maritime Corisuita- vessels,11, 14, 45, 51,58, 59,60,62, tive Organization IMCO!, 145, 63, 85, 100, 112, 151, 188 150 l.iberiatoD charges, 129 TonnageMeasurement of ShipsCon- Generalcommodity gencom!, 18-20 ference, 146 Germany,West, commercial trade, 65, 66 Interoceanic Canal Study Commission exportsand imports, 77, 78, 88, 103 IOCSC!, 16, 17, 22, 73, 93, 100 flagtransits, 52, 54, 56 104, 112, 125, 134, 149, 157, 161, tolls, 53 164, 165, 170, 171, 185 INDEX 2Gl lOCSC cont.! Liquidbulk cargo, 2, 69,70 Deep Draft Lock Canalproposal, 157 LiverpoolBay, 106 164, 165, 170, 185 Seealso Third LocksSystem! Lockages,tandem, 94, 98, 109 Reportof 1970, 87, 89, 150, 157 Lockchambers, 20,30, 37, 43. 189 crosssection of, 111 Isthmusof Panama,43, 149, 153, 161, 164, 165, 169, 177, 180, 181, 191 limitationsof,physical, 70,85, 94, 95, 98, 105-106,155, 157, 189 pipelinefor petroleum,133, 173-174, lockagetime, 121 186 maneuveringinto, 38-39 overhauland repair, 110 retainingpresent locks. 85-86 Japan, commercial trade, 65, 66, 72, 103 costs, 130 distanceand time saved,7, 10, 16, 17 Seealso Gatun Locks; Mlraflores «nd exports and imports, 61, 69, 77, 78, PedroMiguel Locks! 81, 83, 88, 102 Lockchambers, o peration of,31, 33, 37, flag transits, 52, 54 109, 121 tolls, 53 time constraints,108-1 10 Zapari Maru, 129 Lockmasters,25, 29, 30, 31, 111 Johnson,Emory R., Dr., 126, 127, 148, Locomotives,lock wall, 20, 28, 29, 30, 149 31, 39, 107, 109, 1 12,116, 1 20 Johnson, Lyndon B., 176, 186 costs of, 121 Robles announcement, 177, 179 Logarto, 161 Seealso Ses-level Canal! Lumber shipments,135 Kearney, A.T., Inc., 111, 125, 185 Kiel Canal, 140-141 Kissinger,Henry A., 132, 178, 179, 180, Madden Dam, 108 182 construction of, 115 Klette, Immanuel J., 186, 187 Madden Lake, 24, 117, 164 Kocaloon Bay, 106 water for lockageoperations, 35, 108 Major, David C., 150 Marcus, Henry S., 104 Land- and inini-bridge systeins,15, 61, Marine Traffic Control Office, 28, 29, 95, 124, 125, 140, 151, 174-175, 108, 109, 120 186, 190 present, 122 Us Panama Canal artist's concept of proposed Center, costs comparison, 17 123 nautical miles and time, 16 See also Panama Canal Company! Landslides,at Canal, 25, 165 Maskin, Alfred, 73 Gaillard Cut, 35 Master, Ship' s, 29 Lassiter, J.B., 186 May, Albert R., AIMS!, 133, 185 Leber, Walter P., Gov., 21, 135, 136 remarks regarding Canal toII system, Leggett, Robert L., 182 133 Liberia, commercial trade Meadows, D.L., 104 flag transits, 52, 54, 56, 65 Measurement,for toll charges,27, 29 tolls, 53 Measurement,universal system, VMS!, Liberia, 129 145-146, 150 Lighter-aboard-ships LASH!, 45, 105 Merchant Marine Act of 1970, 55, 71, AcadiaForest, 129 193 Lighting, artificial, at Cut, 35, 116 Seealso American Merchant Marine! Limon Bay, 8, 23, 27, 31, 32 Military traffic, 13 Linehandlers,31, 112, 120, 167 Mini-bridgesystems, 15, 20, 94, 104 Lingley, Stewart G., 22, 150 See also Land- and mini-bridge systems roam rsnarna s anm, ae cnannei excaviriea rvr, o ~ government traffic, 49-50 costs, 153-154, 170, 190 historical traffic statistics, 46-47 disadvantages,159-161 amaH ship traffic, 50 schematic, 158 SHP See Shafthorsepower j See also Deep Draft Plan! Single-screwships, 39 Thurmond, Strom, 157, 185, 187 Size of transiting vessels,31 Time See alsoDimensions; "Panarnax" ! average, in Canal waters, 116 Solomon, Ezra, 187 coristraints of lock operations, Speed, within Canal, 38 108-1 10 S.S. Anron, 25, 26 Time savings, via Canal, 9-11 S.S Arctic, 44,46 chart, 10 S S. Bremen, 106 See also Advantages, Maritime! S.S. France, 106 Toll charges, 11, 13, 17, 22 S.S. Melodic, 45 authority to fix, 126-128 S,S. United States, 106 cargo on open decks, 45 Standardof service,114.115 comparative, paid by principal users, Status of forces, 177 chart, 53 Steers, Philip L., 150 computation, 27 Stevens,canal builder, 25 cost of transiting, 71 INDEX 205 Toll charges con t. J Tolls, cost of transiting tcont,! increase, proposed, 102, 143-145 toll policy fundamenta!s,1S4-139 measurement and payment of, 27, 29 administrativecosts, 139 net rneasurernent tonnage, 27 definitions, 134-136 national defense costs, 41 marginal toll policy, 139 rate of increase, 86 objectives, 136-1S9 total tolls received, individual years viewsof U,S. MerchantMarine, 1SS 46-47 Toll systemproposed, 141-1 i3 T,S.S. Tokyo Bay, 107 Tonnage Certificate, PanamaCanal, 27, U.S, government, 29, 49 il, 140 See also Tol!s, cost of transiting Tonnage,ship transits Canal! average registered groin, 65 Toll, effective,per weightton, 134 net measurement of transiting vere!s, To!!, elimination of, 136 60 Toll-free shipping, Panama Canal, 50, Trade routes, cargo movement on Canal, 128 74 Toll policy See ToHs,cost of transiting See aho Cargo movement j Canal! Traf fic forecast, 189 Toll revenue deficiency, chart, 130 Traffic, PanamaCanal To!ls, cost of transitingCana!, 126-150 current trends, 63-71 finances, need for new system, impact of supercarriers,69 7 1 129-133 increased size and tonnage, 6S-67 rising costs, 131 rise of containerships, 67-69 source and level of income, slowingof trafhc growth,63 129-1 31 specializationof vessels,67 treaty negotiationswith Republic different nationalities, 54 of Panama, 132-133 types of vessels,67 63 future toll strategies,145-148, 190 dry bu!k carriers,57-61 International Convention on Ton- containerships, 57-61 nageMeasurement, 145-146 generalcargo, 62-63 maximizingbenefits, 137-139 passengerships, 57-61 toll policy for Canalas traffic in- tankers, 58-62 creases, 147 Traffic patterns,future estimate, 85-86 toll policy for sea-levelcanal, Seealso Cargo and traffic trends! 147-148 Traffic trends historyof toll system,126-129 SeeCargo and traffic trends! Attorney Generalruling, 127 Trains,unitized, 15, 16, 19, 61, 174 !ega!framework, 128-129 Seeotso Rail transport! Transferpossibilities, 17 3-176 othersystems in use,140-143 coal and ore movingbelt, 174 Kiel Canal, 141 petroleumproducts, 173-174 St. LawrenceSeaway, 140-141 Transiting,Panama Canal, 23-40 Suez Canal, 141 broad viewof, 23-25 toH systemsbased on charges northwardfmm PanamaSay, 23 againstcargo, 141-142 southwardfrom the Atlantic,23 toll systemsbased on earningca- ! ong-rangeplans, 39-40 pacity, 142-143 navigationproblems, 38-39 possibletoll systems,140 fogand wind, 38 proposalto increase toll rate, 14S-145 maneuveringinto locks,38-39 effect on Canaltraffic, 145, 187 suctionfrom vere!movement, 39 projectionof 1975revenues and pilotageand scheduhng of,29-31 costs, 143-145 canalpilot, ro!e of, 29-30 systemin operation,129 scheduling,30-31 costsof toUs,samples, 129 i~~eczav rtyuroiogicNAvystem! Watercontrol valves, 31, 110 United Kingdomcommercial trade, 65, Wentworth,Howard L., Captain,42 66, 72, 103 WorldBank, 154, 173