According to the Wall Street Journal, work on the Panama Canal expansion has been suspended, due to a dispute over who will pay for $1.6 billion in cost overruns:

The pace of work on the project, 70% of which is finished, has been slowing over the past few weeks, as GUPC [the consortium running the project] complained of a lack of funds, and virtually ground to a halt earlier this week. The new waterway being constructed seeks to ensure that bigger ships can fit through the 100-year-old Canal, and it is widely seen as fundamental for the development of Panama’s economy.

The storied canal, built by American engineers, is among the world’s most vital shipping routes, acting as a shortcut between the Pacific and Atlantic oceans that shaves nearly two weeks off travel times for ships that otherwise would need to travel around South America. . . .

For its part, the U.S. Embassy in Panama said later Friday that it would like to see a quick resolution to the dispute. The expansion project, which will allow larger ships to pass through the canal, has prompted many U.S. ports to upgrade their facilities.

Julia McKay, the embassy spokeswoman, said in an emailed statement “that timely completion of the Canal expansion is important to these ports and to U.S. trade.”

For our ports here in Washington, expansion of the canal could mean loss of business. As we wrote in Export Activity Boosts Washington’s Economy,

There is stiff competition among ports for export business. Traditionally, Washington’s biggest competitors have been other ports on the U.S. west coast. In 2011, 23.3 percent of west coast exports passed through Washington ports; 72.9 percent passed through California; and 3.8 percent passed through Oregon. . . .

Washington’s ports face additional competition on the west coast from British Columbia. In 2011, exports through the consolidated ports of metro Vancouver weighed 82.1 million metric tons, while exports through Prince Rupert weighed 19.3 million metric tons. In 2012 B.C. Premier Christy Clark announced an 8-year, $25 billion public/private plan to invest in infrastructure to expand exports to Asia.

In the future the competition won’t just be from west coast ports. The Panama Canal Authority is in the midst of an eight-year project to expand the canal. Currently the largest vessel that can use the canal is 965 ft. long and 106 ft. wide with a draft of 39.5 ft. (Panamax size). After expansion the limits will be 1,200 ft. long and 160.7 ft. wide with a draft of 49.9 ft. (New Panamax size). A Panamax container ship may carry up to 5,000 standard containers (20 ft. × 8ft. × 8.5 ft.), while a New Panamax ship might carry up to 13,000. The larger ships are expected to significantly decrease the cost of direct ocean shipping between ports on the East and Gulf coasts and ports in Asia.

East and Gulf coast ports are racing to prepare. By the time that the expanded canal opens in 2015, the ports of Baltimore, Houston, Miami, New York/New Jersey, and Norfolk will be ready to accept New Panamax container ships. The ports of Savannah, Jacksonville and Charleston, among others, are also planning to accommodate the larger ships.

It has been estimated that 20 to 35 percent of current Asia traffic through west coast ports could be diverted to the east and Gulf coasts.