The 2016 election will feature two candidates who reject, at least rhetorically, international trade. But it may be difficult for either to maintain that position once in office because international trade is likely to get many more friends thanks to the expansion of the Panama Canal.
The Panama Canal Authority is scheduled on June 26 to officially open the $5.4 billion renovation of the main connection between the Atlantic and Pacific Oceans that will allow passage of ships with capacities of up to three times the size of the current ones.
The expansion is expected to double the canal’s capacity and reduce global maritime costs by an estimated $8 billion a year. It will radically reshape the U.S. transportation industry, reducing the time and cost for East Coast ports to trade with Pacific Rim countries. That in turn will make international trade in that region of even greater importance by giving a lot more people skin in the game.
And that will test the resolve of presumptive nominees Hillary Clinton and Donald Trump, both of whom oppose the Trans-Pacific Partnership, a major 12-nation trade deal set to be voted on by Congress later this year.
“Whoever will be in office a year from now, they’ll be faced with a new reality on trade,” said David Salmonsen, senior director of congressional relations for the American Farm Bureau Federation trade group.
The canal expansion has kicked off a rush among East Coast ports to renovate to accommodate the traffic. Large ships that previously had to cross the Pacific and drop their cargo in California ports now will be able to use the canal to drop it off in places such as Louisiana, shaving time off the overland journey. Meanwhile, the East Coast will have more access to Asian markets.
“Really, all we have been doing for the last five years is preparing for those ships,” said Jim Newsome, president of the South Carolina Ports Authority.
Shipping costs are already less per mile than rail or transit and more environmentally friendly too, Newsome notes. Several recent paralyzing labor strikes at West Coast ports, one of which in February required Labor Secretary Tom Perez to intervene, will only make the East Coast more attractive to shippers.
It is not just the Americas that will be affected, noted Bill Cassidy, senior editor of JOC.com, the online publication of the Journal of Commerce. It is having an impact on trade as far away as the Middle East.
“The Suez Canal is already offering discounts. There is going to be a price war,” Cassidy said. “It is going to be a very big deal to the balance and importance of trade.”
Trade advocates think there will be a spillover effect. “I am hopeful that it will have a positive impact on discussions like the one over TPP,” said Linda Dempsey, vice president of international affairs for the National Association of Manufacturers.
The Trans-Pacific Partnership has drawn strong opposition from liberal groups, especially labor unions, who fear it will ship their jobs overseas. Support from conservative groups has been tepid. They have little interest in sticking out their neck for a deal President Obama negotiated.
A vote on the trade deal won’t happen until after the November elections, if it happens at all. Senate Majority Leader Mitch McConnell, R-Ky., has said the issue is too controversial to vote on anytime before that.
“We are in a very bad political position for advancing trade right now,” lamented Marc Scribner, transportation policy fellow for the free-market Competitive Enterprise Institute.
If the deal fails or a vote doesn’t happen, it would be up to the next president to decide whether to re-submit it to Congress.
Both presumptive major party presidential nominees have indicated that they would not. However, Clinton supported the proposed trade deal while she was still Obama’s secretary of state and only turned against it during her hard-fought primary battle with Sen. Bernie Sanders, who was trying to out-flank her on the left.
Trump has called the trade pact a “terrible one-sided deal that … enriches other countries at our expense,” but he has shown himself to be flexible on a variety of issues.
Whoever the next president is, he or she will find that the number of voices calling for access to Asian markets has only grown with the canal’s expansion.
“It will add to the list of issues that those who make these decision have to take into account. It will add to the reality of how trade really impacts,” Dempsey said.
