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Supership Problems

Dec 14, 2010 • Demand, Supply, and Markets, Developing Economies, Economic History, Economic Thinkers, International Trade and Finance • 187 Views    No Comments

When is a supership a problem? When the water is not deep enough or the Bayonne Bridge is not high enough.

To understand the Bayonne Bridge problem (and care about the answer), we have to look back to August 1914 and then ahead to August 2014. The Panama Canal officially opened on August 14, 1914. Connecting the Pacific and Atlantic Oceans, the canal diminished transport time and cost for worldwide shippers. Now, the canal will again enhance efficiency through a widening project that should be completed during August, 2014. For a new generation of larger container ships to use the canal, it had to become wider.

But that was only the beginning. From the Panama Canal, huge ships will travel to U.S. ports. Now, according to the NY Times, many of these ports need to have their capacity extended. Georgia, for example, with national and local funding, is spending $625 million to deepen the Savannah River by 6 feet. For the Port Newark-Elizabeth Marine Terminal, the problem is not the water. It is the Bayonne Bridge. To accommodate the superships, the bridge needs to be 64 feet higher or replaced.

Will New Jersey spend the money? The Bayonne Bridge blog says, “Yes.”

The Economic Lesson

19th century economic thinker David Ricardo stated the classic defense of free trade when he expressed the principle of comparative advantage. “Trade, trade” he said because each nation then can do what it does best (where it has the comparative advantage) and the whole world benefits through greater efficiency.

By facilitating the worldwide movement of goods, the Panama Canal enables nations to specialize and to benefit from comparative advantage.

 

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