California will take another hit right in the struggling economy starting April 2015. Instead of loading and unloading at California ports, many international cargo ships and oil tankers will start accessing the booming Texas economy. Texas is flourishing under Rick Perry’s Republican policies. A dramatic expansion of the Panama Canal will give more choices to massive, new cargo ships.
The Panama Canal has been at maximum capacity, with more ships transiting the Isthmus of Panama than the canal was designed to handle. But more importantly, changes in the shipping industry are in play. Massive new megaships are transforming the industry. Those ships currently have no choice but to load and unload in California.
This development could shift a slice of a market valued annually in the trillions of dollars away from California toward Texas and other ports on the East Coast of the United States. One ocean port can generate billions of dollars in state and local tax revenues.
The Port of Los Angeles alone generates 919,000 regional jobs and $39.1 billion in wages and tax revenues each year. Los Angeles ports handle about 40% of all the container traffic in the United States. There are a total of 3 million employees in industries related to port operations. Studies project Los Angeles ports will lose between 1% and 25% compared to existing levels of trade.
Greater Los Angeles has remained highly prosperous despite decades of left-wing regulations and governmental policies burdening the California economy. Trade through California ports of entry has helped keep California afloat financially.
Ocean-going shipping is the cheapest mode for transporting freight by far. Therefore, shortening the distance that freight travels over land can dramatically affect the overall expense of importing or exporting products. By sailing through the Canal to unload directly in Houston, New Orleans, Mobile, Ft. Lauderdale, Charleston, etc., shippers can significantly reduce total costs.
NBC News explains: “Khalid Bachkar, a professor at the California Maritime Academy, said the shipping industry is shifting toward megaships,” which “carry two to four times the number of containers as older vessels.”
At American Thinker, Silvio Canto reports: “large ships will be able to cross the Canal and go to Houston, a port in ‘a right to work state’ and with quicker access to much of the country. New Orleans and other Gulf of Mexico ports will also benefit.”
An estimated $5.25 billion is being spent, since 2007, to deepen and widen the Panama Canal’s Pacific and Atlantic entrances, to raise the level of Gatun Lake, and to install new locks. As described by NBC, “When the project is completed in 2015, ports on the East Coast and Gulf Coast will be able to compete for business that until now has been dominated by West Coast ports. At stake are thousands of jobs and billions of dollars in federal and local investment.”
As a result, ports from Houston to Boston are themselves spending many millions of dollars in upgrades to capture the business. East coast ports are being dredged to increase operating depths to 53 feet. Only Baltimore, Maryland, and Norfolk, Virginia are able to handle the new megaships so far. Los Angeles is responding to try to keep the business with $1.2 billion of capital improvement projects over the next five years.