Panama Canal is a route used in shipping of cargos across the Atlantic Ocean to the Pacific Ocean through the Caribbean Ocean. It is widely said to be the largest public investment that has ever been of its time. It is reported that the canal produced significant social returns in its first decade of operation mostly for the United States. It also played a significant role in improving the Panamanian economy. However, it is speculated that United States benefits more than any other country including panama who are the owners of the canal due to the shipping of petroleum from California to the East Coast. This route is a short cut and therefore it reduces the costs of transportation hence economical1.
The early boosters of the canal were optimistic that it will help in improving the economy of all its users equally. “For example, a 1903 estimate delivered to congress concluded that a canal would produce benefits which when capitalized would be worth $1.2 billion, or 4.7 percent of United States gross domestic product”2. The Panamanian economy is not exempted as it is reported to have shot in its growth rate between 1915 and 1930 which were the early decades of the use of the canal. In 1913, the Panamanian ambassador to Washington expressed his enthusiasm and noted that the canal is in their territory and as a result, they are the ones with the greatest advantage over all other countries that are using it. Book writers also speculated that panama would become one of the commercial cores of the universe3.
The direct benefit that the Panama Canal created to the world trade is the shortening of the distance between the west and the east coasts of North America and that of Europe and North America. Without this canal, the shipping of cargos would take place along the transcontinental railroad which runs around the southern tip of South America. Alternatively, one could use panama roads or Tehuantepec. However, these routes are said to be costly and uneconomical4.
According to the reports given by the United States department of transportation, 1.4 billion metric tons for foreign trade accounted for 19 percent of global waterborne trade5. The major transportation is through the Panama Canal. The significance of Panama Canal since its construction in 1900s is wide both to the United States and Panama City. Trade between the two countries has been enhanced and accessibility to sophisticated equipment from the United States to other countries is much easier. As a result, a significant percentage growth of the gross domestic product of the United States is dependent on this canal. It is estimated that between 1903 and 1930, the canal contributed to about 10 percent of the United States gross domestic product. This elaborates how significant the Panama Canal is not only to Panamanian economic growth but also to other countries that use it such as the United States6.
The Panama Canal’s economic importance is not only confined to the United States but to the global economy. For instance, England sells products to Peru and ships them through the canal. The cost of transportation would increase if there was no access to the Panama Canal. This is because the only route that England would use is sailing through South America. England would incur extra expenses and the prices could increase. Peru could not afford to buy many products from England due to price increase and this would reduce the export revenue gained from it. In return, the economy of the two countries would be less than it is with the presence of the Panama Canal. As a result, England would have less money to buy goods from the United States. This applies to as many countries as possible that use the Panama Canal for shipment of cargos and trade. Hence, the Panama Canal is very vital to the world economy7.
The shipping industry has benefited to a greater extent since the construction of the Panama Canal. It is reported that there used to be many wreckages during the transportation of cargos by the way of railroads. This would result into loss of a lot of money and property. Besides, the use of trains increased environmental pollution but this has been reduced drastically by the use of the canal. In addition, it has contributed to creation of employment opportunities to Panamanians and the United States8.
In conclusion, the Panama Canal is of great significance to the world economy. This is not limited to panama but to many countries across continents. It is a technology that has enhanced easier transportation of cargos full of goods, war equipment, petroleum and many other things across countries and continents. It has created job opportunities for many people and improved living standards of individuals in the United States, panama and Europe at large. Therefore, the impact of the Panama Canal is wide and large both in global economy and Panama City itself.
References
Gollasch, Stephan, Bella S. Galil and Andrew N. Cohen. Bridging Divides: Maritime Canals as Invasion Corridors. Berlin: Springer Netherland, 2006.
Maurer, Noel and Carlos Yu. What Roosevelt Took: The Economic Impact of the Panama Canal, 1903-29. Hbs.edu. 5 Jul. 2006. Web. 26 Aug. 2012.
Salin, Delmy L. “Impact of Panama Canal expansion on the U.S International System.” Accessed on 26 Aug. 2012 from <www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5082003>
United States Congress House Committee on Banking and Financial Services Subcommittee on Domestic and International Monetary Policy. The financial and commercial impact of the Panama Canal Treaty : hearings before the Subcommittee on Domestic and International Monetary Policy of the Committee on Banking and Financial Services, U.S. House of Representatives, One Hundred Sixth Congress, first session, December 7, 8, 1999. Washington, DC: Congressional Sales Office, 2000.
