We Stand at the Center of World Trade

MBA students study world trade in many ways. They study supply chain management—how to efficiently design, source, assemble and distribute goods from around the world. They examine global capital flows and currency exchange rates and learn international finance and tax strategies. Our students learn the impact of trade on labor practices, migration, energy use and economic development. In many ways the students came to Panama knowledgeable about global trade and its impact as a result of their business experience and what they are learning in class.

For two days this week they got to experience global trade in a way we cannot teach them at UC Davis. They saw trade as a material flow, as huge ships carrying goods from one distant place to another. There is nothing quite like seeing dozens of ships queued up to enter the Panama Canal, or standing in the midst of thousands of containers being off-loaded and re-loaded at the Port of Balboa to appreciate the enormity and connectedness of global exchange.

On Wednesday we went to the Panama Canal Authority, the governance and administration office of the Panama Canal, and to visit the Miraflores Locks. The Canal is not the long tube-like passage I had imagined. Rather it is a series of locks that raise ships in a step-wise fashion at one end until they reach the large man-made Gatun Lake which is 85 feet above sea level. They traverse the lake and a series of islands in the middle of the country under the control of one of the Canal’s 300 pilot captains. The ships then step down through another series of locks to the other ocean, either the Atlantic or Pacific depending on the direction of travel.

I could see why cruise ships take this trip. Not only is it a bird’s eye view of an engineering marvel, it is a trip through a lush tropical landscape. The whole trip takes 24 to 48 hours and the crossing fee can be well over $100,000. The largest tariff ever was more than $300,000.

The Panama Canal is being expanded to accommodate larger ships. “Panamax” ships – the maximum size vessel currently accommodated in the Canal, are now dwarfed by newer container ships. In order to compete successfully with the Suez Canal, the Panamanians are developing a third series of “post-Panamax” locks. This is a $5+ billion investment by the Panamanian people in the future of the Canal.

Because the Canal is not being used by the U.S. as a strategic military asset, but by Panamanians who see it as an economic and development asset, they are investing in it as a business. It is extremely well run—something we learned from engineering consultants back in California—and is now a place that Panamanians can learn management techniques. We saw a troop of maritime engineer students who were on internships at the Canal.

Through a couple of well-placed phone calls we were invited to stand, literally, on a swaying bridge atop the Miraflores Locks. I may travel through the Canal some day, but I suspect that this was the only time I will ever stand on the Panama Canal.