Journal of Transport Geography 43 (2015) 1–13

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Journal of Transport Geography

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The Nicaragua Canal: scenarios of its future roles

http://dx.doi.org/10.1016/j.jtrangeo.2015.01.0020966-6923/� 2015 Elsevier Ltd. All rights reserved.

⇑ Corresponding author.E-mail address: t.l.yip@polyu.edu.hk (T.L. Yip).

Tsz Leung Yip ⇑, Mei Chi WongC.Y. Tung International Centre for Maritime Studies, Department of Logistics and Maritime Studies, Faculty of Business, The Hong Kong Polytechnic University, Hung Hom, Kowloon,Hong Kong

a r t i c l e i n f o

Keywords:Nicaragua CanalPanama CanalScenario planningTransport geography

a b s t r a c t

Connections between the Atlantic and Pacific oceans are vital for international trade. Since 1914, the Pan-ama Canal has provided ships with a direct interoceanic canal for crossing the Atlantic and Pacific oceans.The geographical advantage of the Panama Canal allows it to enjoy an exclusive position in internationalseaborne trade. Passage demand through the canal has increased continuously since its opening, withabout 12,000 vessels travelling through it in 2013. However, the Panama Canal’s monopoly in interoce-anic canal operations may soon come to an end. In 2012, a memorandum of understanding was signedbetween the Nicaraguan Government and a Chinese investor to construct the Nicaragua Canal, which willbe built about 400 nautical miles from the Panama Canal. It is expected that the Nicaragua Canal will beoperational by 2020. The proposed canal will not only provide an alternative route for vessels to passbetween the Atlantic and Pacific oceans, but will also trigger dynamic changes in seaborne trade patterns.To assess the long-term benefits of the proposed canal, we use a scenario planning method in this studyto provide a framework for constructing several scenarios for 2030, 10 years after the anticipated con-struction of the canal. To develop the scenarios, we consider three macroscale drivers, namely politics,economics, and environment, and the causal relationships between them. Combinations of pairs of driv-ers are used to generate dominant scenarios to anticipate the role of the Nicaragua Canal with respect tofuture international trade. The analysis presented in this study will provide transport geographers andother major stakeholders with alternative mindsets into the future spatial changes in and developmentof maritime transport.

� 2015 Elsevier Ltd. All rights reserved.

1. Introduction the proposed canal. Shipping is a derived demand, and shipping

On 8 October 2012, the Nicaraguan Government signed a mem-orandum of understanding with a Chinese consortium for the con-struction of a new canal, the Nicaragua Canal. The NicaraguanCongress approved the canal project on 24 June 2013, and its con-struction is viewed as controversial. The head of the canal author-ity announced on 4 January 2014 that the construction will likelybegin in 2015. The new canal will be an interoceanic waterwayconnecting the Caribbean and Pacific coasts of Nicaragua (Fig. 1),and the canal is expected to be operational by 2020. It is antici-pated that the construction of the Nicaragua Canal will face numer-ous challenges, including political, economical, social, andtechnological challenges. The present study presumes that the Nic-aragua Canal will become operational in the future, and does notexamine the feasibility of its construction.

This paper assesses the possible roles that the proposed Nicara-gua Canal may adopt by 2030, 10 years after the construction of

patterns are affected by many factors. The emergence of a newcanal will provide an alternative option for ship navigationbetween the Atlantic and Pacific oceans. The potential roles ofthe new canal will depend on various influences, including thepresence of competing waterways. Moreover, a new canal willstimulate the development of shipping and trade. Therefore, ourstudy attempts to anticipate changes in shipping patterns by usingscenario planning under the uncertainties of the future, especiallywith respect to countries in Far East Asia, such as China, Japan,Korea, Vietnam, Malaysia, and Singapore. The regions connectedby the Nicaragua Canal, that are, the East Coast of America andthe Far East, are stakeholders in the construction of the NicaraguaCanal. Both China and South America may undergo dynamicchanges as they are the most involved in the investment and willbe presented with huge trade and development opportunities.Because a Chinese consortium is both the investor and constructorof the proposed Nicaragua Canal, China is regarded as a key stake-holder in the canal. Therefore, we focus on the possible impacts onChina due to the canal and on the possible reactions of China.

This study develops possible dominant scenarios driven byidentified drivers, demonstrates possible interactions between

Fig. 1. Interoceanic waterway connecting the Caribbean and Pacific coasts of Nicaragua. Remark: The Approved Route was approved by the Nicaragua Government on 7 July2014. Source: Google Maps.

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the Nicaragua and Panama Canals (Fig. 2), and predicts the possibleroles of the Nicaragua Canal. Shipping patterns are a result of routechoices of shipping companies. Route choices are determined bymany factors, such as distance, transit time, cost, physical con-stants, and safety (Huebner, 1915; Fagerholt, 2004; Mostafa,2004; Somanathan et al., 2009; Verny and Grigentin, 2009; Liuand Kronbak, 2010; Schøyen and Bråthen, 2011; Tavasszy et al.,2011; Notteboom, 2012). This study focuses on analysing how glo-bal-scale drivers (politics, environment, and economics) mightaffect the role of the new canal in the presence of a competingexisting canal, and how the two canals will jointly affect the pat-tern of trade. As a result of the new information presented in thestudy, policy-makers and other major stakeholders will benefitby being able to incorporate alternative mindsets into the formula-tion and development of future strategy. Major stakeholdersinclude the Nicaragua and Panama Canal authorities, investors,and users of the two canals.

The Nicaragua Canal may alter the geographical pattern of eco-nomic development in the regions that it connects, especially theeast coast of South America. This paper investigates the spatialdynamics of shipping transport induced by the interactions oftransport with national and regional economies, energy, and theenvironment (including climate change). The roles of the Nicara-gua Canal and the Panama Canal are related to the globalisationof economies and trade, and to political as well as environmentaldrivers. The Nicaragua Canal will not only alter the balance of loca-tional advantage but will also promote changes in the worldwidepattern of shipping. Accompanying these changes will be adjust-ments in the international flows of raw materials, cargoes, andfinished products as well as in the spatial patterns of production.

The remainder of the paper is organised as follows. Section 2contains a review of the literature related to canals and scenarioplanning. In Section 3, drivers and key assumptions are discussed.In Section 4, three scenarios are constructed by considering theinteractions between each pair of the three drivers. In addition,the possible roles of the new interoceanic canal are formulated.Moreover, the interactions of the new canal with the neighbouringPanama Canal are discussed. Section 5 presents the implications ofthe study and a summary of the analysed scenarios and corre-sponding strategies. The conclusion includes a brief outline of pos-sible directions for future research.

2. Literature review

The number of studies comparing the competitive roles ofcanals or waterways is rather small. Related studies include thosethat have investigated the competition of a waterway againstanother waterway or land route. Canals and trade routes maintaintheir competitive advantages by providing a shortcut to countries,for example, the Panama and Suez canals, or a deep channel foraccessing resources, for example, the Cape of Good Hope. In the1970s and 1980s, a few studies analysed the competition betweenand complementary nature of canals or trade routes. After the SuezCanal had been closed, Gradus (1977) investigated whether theNegev Desert could be an alternative to the Suez Canal. That studycompared cargo traffic between the desert route and the canal forthe period from the closure of the Suez Canal to its reopening, andanalysed the reasons for the failure of this continental bridge.

The dominant interoceanic canals have formed relatively stableshipping patterns during their existence. Over the last two decades,

Fig. 2. Locations of the Nicaragua Canal and the Panama Canal. Source: Google Maps.

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global warming has not only raised public concerns regarding envi-ronmental protection, but has also altered shipping patterns. Themelting of ice caused by global warming has made new routes pos-sible, including Arctic routes. After the Arctic routes became morenavigable, the distances between Far Asia and Europe and betweenAsia and North America were shortened. Some studies have illus-trated cost advantages of new routes by comparing them againstthe existing, dominant routes of the Panama Canal or Suez Canal.Somanathan et al. (2009) simulated the shipping route betweenAsia and the eastern coast of North America via the Northwest Pas-sage in northern Canada and the Panama Canal, respectively, tocalculate the required freight rate. Those authors concluded thata viable economic benefit may be gained when Arctic ice is thinnedin a future scenario of further melting. Verny and Grigentin (2009)analysed the economic feasibility of the Northern Sea Route (NSR).They adopted a model schedule to compare the transport costs ofmoving goods between Shanghai and Hamburg through the NSR,Suez Canal, Trans-Siberian Railway, and multimodal transportalternatives, respectively. They concluded that the Suez Canal pro-vided the least expensive cost among those choices. Liu andKronbak (2010) investigated the economic potential of the NSRas an alternative to liners for passage between Asia and Europe.The study was conducted from a user’s perspective by conductinga case study and assuming a 4000-TEU containership as the vessel.By adjusting the main factors (e.g., bunker prices, the navigabletime for the NSR, and ice-breaking fees), the economic feasibilityof the NSR under different scenarios was tested. It was concludedthat the NSR was not a competitive option to the Suez Canal.Schøyen and Bråthen (2011) explored the potential benefits of sav-ing energy for the shorter distance of the NSR, by attracting trampshipping from the present dominant shipping routes of the SuezCanal. It was found that the NSR may be profitable for minor bulktrades during summer periods. Notteboom (2012) analysed howthe Cape of Good Hope route could be developed as a competing

alternative waterway to the Suez route by using distance analysis,transit-time analysis, and generalised cost analysis.

Several studies have focused on the competitiveness of the Pan-ama Canal after confirmation of the expansion plan for that canal.Fan et al. (2012) analysed the impacts of the Panama Canal expan-sion and of the potential Northwest Passage on America. The studyused a quantitative approach for estimating cost and time savingsto determine the competitiveness of existing and new routes. Thefindings depend very much on the preset hypothesis and assump-tions. Ungo and Sabonge (2012) developed a model to assess thecompetitiveness of the Panama Canal against alternative routesbased on total transport costs, including the inland transport costs.

As a point of difference from previous studies, scenario planningis used here to formulate the initial future strategies that willenable the Nicaragua Canal to become an important asset for mar-itime transport. Scenario planning is widely used for evaluatinglong-term corporate strategies, with a classic example being thestudy conducted by Shell (2005). Shell developed an oil-crisis-based scenario one year before the break-out of the Yom KippurWar and subsequent oil crisis in 1973. The scenario planningallowed Shell to prepare for the crisis and to offer a rapid responseto it. The recognition of future uncertainty and the adoption ofadaptive management processes allowed Shell to outperform othercompanies and move from being one of the smallest to being thesecond-largest multinational oil company (Wack, 1985). Shell con-tinues to practice forward thinking by using scenario planning.Moyer (1996) demonstrated the application of scenario planningin a case study of British Airways. The scenario planning studyenabled British Airways to broaden its views on how the worldwould change in order to determine the corresponding corporatestrategy for coping with an uncertain future. A review of the sce-narios shows that one of them, namely ‘‘Wild Garden’’, actuallyoccurred. These two case studies show the value and realism ofscenario planning, especially when the real-life situation involves

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many uncertainties and unforeseeable elements. Scenario planningcan be applied to forecasting the future and to managing risk underdynamic change for such varied fields as new products (Ahn andSkudlark, 2002), industries (Stokke et al., 1990), regional transportplanning (Zegras et al., 2004), and national policy (Kahane, 1992).

Millett (1988) examined the ways in which organisations areusing scenario planning for strategic thinking and management.Millett’s research illustrated the advantages of using scenario plan-ning in offering alternative views of the future. Such an approach isthe best to use for long-term planning involving complex situa-tions, especially when little or no data are available for quantitativemodels. The business environment can be forecast to evaluate andidentify the most suitable strategies corresponding to the identi-fied scenarios. Millett (1988) summarised the insights gained fromscenario planning and concluded the study by citing corporateexamples that have used scenario planning for strategic thinking.One of the insights reveals that during scenario planning, plannerscan deal with competition by considering rival companies withsimilar products and services and by considering emerging threatsin substitute products and services. Godet and Roubelat (1996)argued that the future cannot simply be built based on a continu-ation of the past. Those authors cited the study of Berger (1964),who proposed that the prospective attitude of forecasting shouldbe long term, interactive, risk-taking (distant horizons can enablechange), in-depth (important factors and trends are identified),and interested in human consequences. The results of the forecast-ing should be simple enough to communicate between users andcustomers. Scenario planning can fit these criteria to stimulatethe imagination and to offer visions of the normative future.Straightforward scenarios can be used as background for strategicalternatives when solving ‘‘what if’’ questions. Varum and Melo(2010) reviewed the literature on the scenario planning approachand discussed the contributions of scenario planning, includinghow planners can maintain the competitiveness of organisationsby recognising uncertainty and applying adaptive managementstrategies.

The proposed interoceanic Nicaragua Canal will not only pro-vide an alternative route for vessels to pass between the Atlanticand Pacific oceans, but will also trigger dynamic changes in sea-borne trade patterns. The future, of course, is highly uncertain,especially when only small amounts of data are available for fore-casting possible situations. A longer time frame can blur the impli-cations of scenario analysis, and therefore the year 2030 (i.e.,10 years after the proposed canal is constructed) is set as the timeframe of the present study. Instead of making quantitative fore-casts, we assess the long-term benefits of the proposed NicaraguaCanal by using the scenario planning method to provide an initialframework for generating a small number of future scenarios.We explore novel insights into the future and demonstrate the cau-sal relationships between drivers, and also analyse both micro- andmacrochanges in seaborne trade patterns; the implications arisingfrom our analysis should provide a step towards developing quan-titative forecasts in the future.

3. Development of scenarios

The literature contains different approaches to developing sce-narios. On the basis of the successful application of scenario plan-ning by Phoneweb in 1996, Ahn and Skudlark (2002) outlined thesteps for incorporating scenario planning with particular referenceto the process of developing a new service, which were: (1) gener-ating the issue, (2) developing scenarios, (3) generating strategies,and (4) analysing scenarios and their corresponding strategies. Todevelop scenarios, Ahn and Skudlark used a scenario delta chart,in which key uncertainties and key nodes were identified and

listed. Distinct scenarios were explored based on the effects ofthe trigger event in an uncertain environment and nodes. Zegraset al. (2004) summarised the different approaches adopted forbuilding scenarios, of which two are most commonly used: (1)the inductive (bottom-up) approach, which builds scenarios basedon available data and allows the structure to emerge by itself; and(2) the deductive (top-down) approach, which starts with buildingan overview framework and fits data into it. Zegras et al. (2004)used the deductive approach, by first defining the scope and iden-tifying strategic options, and then outlining key local factors anddrivers. When combining drivers, each driver had two potentialstates, namely good or bad binary possibilities. Sixteen combina-tions of drivers were generated in a matrix, and the three most rep-resentative scenarios were selected. Subsequently, implications ofthe selected scenarios and strategic options were analysed. Shell(2005) constructed a ‘‘trilemma triangle’’ to provide an overviewof global trends, emerging challenges, and corporate strategies.The triangle first identifies a trigger issue and three drivers. Insteadof generating scenarios at each corner of the triangle, that is, from asingle dominant driver, the plausible scenarios are developedbased on the interaction between two drivers and the trade-offof the third driver.

Scenarios tend to be end-member (‘‘dominant’’) possibilitiesand are useful for developing the relevant influences and conceiv-able circumstances. After developing the scenarios in the presentpaper, we are able to address the role or roles that the NicaraguaCanal is most likely to adopt. We appreciate that the reality maynot necessarily be entirely one scenario or another as identifiedin this paper, but that it will more likely lie somewhere in betweenthe identified scenarios. Similarities to the scenario approachadopted here are found in the sustainable development literature,where it has proved impossible to pursue more than two factors (ofeconomy, environment, and equity) at the same time (Connelly,2007).

Following Shell (2005), our procedure for scenario planning issummarised as follows:

1. Decide the key question: what is the role of the NicaraguaCanal?

2. Decide the time frame for analysis: 10 years.3. Identify the key drivers and key components/aspects of those

drivers.4. Determine the dominant scenarios.5. Assess the scenarios and their associated implications.

In the absence of data, a critical step is to identify the key driv-ers, for which we make reference to related studies. Zentner (1982)classified methods for developing scenarios into two types: (1) the‘‘hard’’ method, involving mathematical models and computers;and (2) the ‘‘soft’’ method, involving an intuitive and descriptiveapproach. The most sophisticated ‘‘soft’’ technology is cross-impactanalysis, the purpose of which is to ‘‘identify reinforcing or inhib-iting events and trends, to uncover relationships, and to indicatethe importance of specific events: application of multiple scenariosto corporate strategic planning’’. Godet and Roubelat (1996) cate-gorised scenario planning into two major types: (1) the exploratorytype, in which the likely future is explored based on past and pres-ent trends; and (2) the anticipatory or normative type, in whichdifferent scenarios are built based on different versions, such asthose desired or feared.

There are, therefore, multiple methods available for construct-ing scenarios. A widely held consensus method includes numerousspecific steps, including systems analysis, retrospectivity, actors’strategies, and scenario elaboration. Stokke et al. (1990) performedscenario planning for the Norwegian oil and gas industry. They firstestablished a conceptual model of the external environment,

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which considered: (1) microdrivers, which are the market andindustry drivers that determine future trends, for example, productdemand, price, and market structure; and (2) macrodrivers, whichare the global and national economic, political, technological, andsocial factors. By using an ‘‘impact/uncertainty matrix’’ and scoringscheme, Stokke et al. (1990) identified three alternative outcomes(energy market structure, national economy, and technology), andconstructed four descriptive scenarios and correspondingstrategies.

In the present study, because of data limitations, we use a ‘‘soft’’method (an intuitive and descriptive approach) to investigate sce-narios for the Nicaragua Canal. We build alternative scenariosbased on a cross-impact analysis that reinforces events and trendsto examine relationships using an anticipatory or normativemethod. Instead of using the two-dimensional matrix or good/bad binary possibility approach, we construct a trilemma triangle.Therefore, we develop three distinctive scenarios within the con-text of scenario planning based on the recognition of future uncer-tainty and adaptive management. The key assumptions in thescenario analysis are: (1) an individual canal aims at survivingand building up its own customer base to avoid price competition,if possible; and (2) both canals will respond to the macro scenarioand to the changes made by the competing canal.

In addition, drivers have potentially far-reaching effects on thenatural environment in regard to specific situations. The case ofShell (2005) used trends in the economic, social, international,political, and technological spheres as drivers. Geopolitics, interna-tional economics, and the natural environment are drivers accord-ing to Kahane (1992). Moyer (1996) used technology, education,world trade, and world finance as drivers for the case study of Brit-ish Airways. Zegras et al. (2004) used economy, finance, technol-ogy, and environment for building scenarios for Houston’sregional transport planning.

The present study anticipates the potential roles of the Nicara-gua Canal in future international trade, with politics, economics,and environmental drivers being selected as the three most signif-icant drivers affecting the pattern of global trade. It is understoodthat other drivers, such as cultural and societal drivers, are alsoimportant for developing scenarios. However, the social develop-ment aspects of the proposed canal and of the Panama Canal areprobably very similar, and technological changes apply essentiallysimultaneously to the maritime industry. Therefore, social andtechnological changes are not included in our choice of dynamicdrivers. The three drivers selected are discussed in turn below.

3.1. First driver – politics

Marine passages between or through countries invariably seemto give rise to political issues. The events of 11 September 2001raised the issue of maritime security in the context of politics.The security of countries or regions is vulnerable to maritimeattacks and blockages. A marine passage through a country mayprovide political value (Huebner, 1915) but it is more often thatroute choice is a result of underlying political choice. The emer-gence of a new interoceanic canal affects the existing equilibriumof seaborne trade. When the Suez Canal was blocked by the Egyp-tians from 1967 to 1975, the State of Israel established the Negevcontinental bridge as an alternative to move freight between theRed Sea and the Mediterranean Sea. Gradus (1977) concluded thatthe political driver was one of the major reasons for the failure touse the Negev, and demonstrated that the political driver maydeter some countries’ preference for a particular route.

The security of global maritime trade is therefore critical, andthreats to maritime trade routes make countries vulnerable, partic-ularly with respect to access to scarce natural resources (Nincic,2002; Rodrigue, 2004). Chang et al. (2006) studied the Taiwan

Straits and found that cross-straits shipping patterns are alignedwith political issues. Therefore, both canals and straits may be con-sidered as chokepoints with regard to the supply of scarceresources such as energy and food. As such, these canals and straitsare critical to national economies, international trade, and thesecurity of nations. Since China has become a net importer of crudeoil, Collins and Murray (2008) identified the US, India, and Japan aspotential energy blockaders of China, and examined China’s poten-tial responses to an energy blockade. Some countries providefinancial aid for other countries as a foreign policy objective tosecure energy supply. Energy and scarce materials are highlydependent on maritime transport, and canals and straits are con-sidered as chokepoints. A definite threat to a country arises whenenergy insecurity is caused by a maritime blockade through theclosure or disruption of a canal or strait. In short, the political dri-ver affects the role of a canal.

In summary, a strong political driver will lead to the develop-ment of a split world. The two canals will likely belong to differentpolitical groups. The US is the biggest user of the Panama Canal,whereas a Chinese consortium is the investor and constructor ofthe Nicaragua Canal. It is very likely that the Nicaragua Canal willbe aligned with China’s interests. Given this, it is unlikely that theUS will shift its interest and usage to the Nicaragua Canal.

3.2. Second driver – economics

Integration into the world economy is the best way for coun-tries to grow, and seaborne trade is a derived demand for commod-ities influenced by the global economy (Stopford, 2008) throughthe development of the international network (Perez-Labajos andBlanco, 2004). Since the 1980s, international trade has relied heav-ily on maritime transport. The trade pattern of maritime transportinteracts with the development of the economic and internationalnetworks of countries and regions. Almost a century ago, Huebner(1915) referred to the two main functions of the Panama Canal.One is its political value (it enables the US to transfer naval vesselsbetween the Atlantic and Pacific oceans), and the other is its eco-nomic value (it offers a shortcut to transport freight between thetwo oceans). The shortened distance directly reduces travel time,fuel costs, and access to profitable cargoes. Huebner (1915) sum-marised the economic value of the Panama Canal to the US asone that increases traffic, changes trade flows, and stimulatesdomestic and international economies and the growth of indus-tries. In other words, economic development influences thedemand for trade routes and generates dynamic trade patterns.Mountjoy (1958) analysed the potential development of the SuezCanal, and found that the development of areas linked by the canalwas accelerated. Fletcher (1958) showed that the opening of theSuez Canal offered revolutionary changes to the shipping worldand that this canal shifted the trade patterns of East Asia andAustralasia.

According to the OECD (2010), Kotschwar (2014), and Jenkinset al. (2008), trade between China and South America has beenexperiencing significant growth since the mid-1990s: South Amer-ica supplies China with raw materials, food, and energy, whereasChina provides business opportunities and foreign direct invest-ment (FDI) to South America. China and South America have essen-tially developed as strategic trade partners. Suarez de Vivero andRodriguez Mateos (2010) studied the ocean governance of fouremerging countries (Brazil, Russia, India, and China), and con-cluded that the defence of maritime resources is an importantissue with respect to protecting and maintaining the flows of goodsand raw materials that fuel the economic growth of a country orregion. Sanchez and Perrotti (2012) forecast that vessels with13,000 TEUs, which sail mainly between Asia and Europe or NorthAmerica, will reach South America between 2016 and 2020 if

Table 1Summary of drivers.

Driver Politics Economics Environment

Strong Split world:US-led group vsChina-led group;or Progreen groupand Antigreengroup

Trade is active Environmentalconcerns are highpriority

Weak One world Trade is low Environmentalconcerns are lowpriority

Fig. 3. Trilemma triangle of drivers.

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global and local economic activities and trade activity grow fur-ther. All of the aforementioned studies show that trade affects bothnational and international economic development. Trade patternsinteract with the distribution of and changes in both nationaland international wealth.

3.3. Third driver – environment

The environmental effects of greenhouse gas (GHG) emissionsresulting from world trade are of increasing concern to both gov-ernments and the public. International trade affects environmentalsustainability in two ways, namely, production and transport(Ahmad and Wyckoff, 2003; Nijkamp, 2003; Peters and Hertwich,2006; Weber et al., 2008; Yan and Yang, 2010). International tradeis generated by the demand and supply of a product between twocountries, and GHGs are emitted during manufacturing processes.International trade magnifies the demand for products when man-ufacturers supply the products to fulfil global demand, and trans-porting such products generates GHGs when fuel combusts. Inshort, trade and environment are closely related, as the followingstudies indicate.

Corbett and Koehler (2003) estimated ship emissions on inter-national shipping routes and found that previous estimates ofemissions inventories were underestimated by 50%. Richardson(2005) developed an analysis framework for transport sustainabil-ity that consisted of five consequences: safety, congestion, fuelconsumption, vehicle emissions, and access. Smith et al. (2005)studied the sustainability of food production, and found that theemissions of ship transport between nations may be offset by inef-ficient local production processes. Streets et al. (2006) selected var-ious trade routes and analysed the sulphur emissions from ships inAsian waters. Those authors suggested the need to introduce poli-cies for reducing the sulphur content in marine fuel. Peters andHertwich (2006, 2008) found that some of the environmentalimpact of production can be attributed to consumer purchase pat-terns, with approximately 70% of exports from developing coun-tries being to meet the needs of developed countries. The studyof Pan et al. (2008) further examined the emissions embodied intrade and suggested that international responsibility for emissionsshould be adopted. Yan and Yang (2010) demonstrated how inter-national trade is accelerating CO2 emissions in China. Their studyfound that most CO2 emissions in China are generated throughthe manufacturing of goods for export. The high use of coal andlow manufacturing efficiency have intensified the situation inChina. Yan and Yang (2010) suggested applying a consumption-based CO2 accounting system to ensure that responsibility forCO2 emissions is fairly allocated. Liao et al. (2011) estimated CO2

emissions and suggested that a large reduction in emissions fromtransport could be gained by shifting from inland road transportto sea–road intermodal transport. Mattila and Antikainen (2011)estimated environmental indicators for both future and currenttransport systems, and concluded that if significant changes intransport efficiency and energy mix could be implemented, thensustainable futures could be found. Cristea et al. (2012) quantifiedthe emissions of international transport and highlighted the pat-terns across products and trade partners. Moreover, they furtheranalysed the situation when global trade is affected by liberalisa-tion. In general, transport distance and trade barriers have negativeimpacts on imports. However, Cristea et al. found that full liberal-isation encourages trading between distant countries and, as aresult, emissions increased by 6% when land transport wasreplaced by air transport. The study of Lindstad et al. (2013)assessed the changes in transportation costs and emissions corre-sponding to vessel design and concluded that energy-efficientdesigns of a bulk vessel can significantly reduce both costs andGHG emissions.

In summary, international trade and GHG emissions are closelyrelated in several ways, including energy consumption mix (Streetset al., 2006), the manufacturing/production efficiency of exportcountries (Smith et al., 2005; Yan and Yang, 2010), transport dis-tance and transport modes (Chapman, 2007; Meixell and Norbis,2008; Geurs et al., 2011; Liao et al., 2011; Cristea et al., 2012), shipdesigns (Lindstad et al., 2013), and systems for allocating emissionresponsibility (Peters and Hertwich, 2006, 2008; Pan et al., 2008).Furthermore, regional carbon emissions are influenced by ships’choice of which canal/port to use, and these choices are influencedby the policies of the different canals/ports.

Table 1 contains a summary of the characteristics of the threedrivers under ‘‘strong’’ and ‘‘weak’’ settings.

4. Discussion: three scenarios

We have shown above that international trade is significantlyinfluenced by political drivers, economic drivers, and environmen-tal drivers. In this section, these three drivers are used to developscenarios for the roles of the Nicaragua Canal in 2030. The micro-and macrochanges in seaborne trade patterns are analysed to fore-cast the possible roles of the Nicaragua Canal in future interna-tional trade.

We develop a trilemma triangle by studying the interactionsand trade-offs between the different drivers. The three driversare represented by different colours: yellow represents political,red represents economic, and blue represents environmental. Thistrilemma triangle suggests three scenarios based on the interactionbetween each pair of drivers. Purple represents the interactionbetween economics and environment and is named the GreenGold Scenario; green represents the interaction between environ-ment and politics and is named the Split Green Scenario; andorange represents the interaction between economics and politicsand is named the Gold Split Scenario (Fig. 3). Table 2 contains the

Table 2Summary of scenarios.

Scenario 1 2 3Green Gold Scenario Split Green Scenario Gold Split Scenario

Politics The political environment will be stable and globalised The political environment will beunstable

The political environment will be unstable

Economics Economic developments will be important Trade barriers will be set up Economic gains will be criticalEnvironment Environmental protection will be critical The environment will be at the top of the

political agendaThe environment is not a high priority

Description Countries will boost national economic development andfight against environment by globalisation

Countries will be split into two tradeblocs based on their environmentaltendency, i.e., the progreen group andthe antigreen group

Countries will be split into eco-political blocsCountries will boost national economicdevelopment by extending political influence viaforeign direct investment

Possible rolesof theNicaraguaCanal

� A green corridor� A large-vessel corridor� A specialised corridor

� National chokepoint: energy andfood corridor� A green corridor

� National chokepoint: energy and foodcorridor� A specialised corridor

Reaction ofthe PanamaCanal

� Specialised in handling post-Panamax ships� Become a logistics hub of North America and Latin

America

� Become a military strategic point ofthe US

� Specialised in handling post-Panamax ships� Become a logistics hub of North America� Become a military strategic point of the US

Counter-reaction oftheNicaraguaCanal

� Will fulfil the market gap by offering green services, e.g.,launching a green programme similar to the VesselSpeed Reduction Programme� Will specialise in handling bulk vessels, e.g., transport-

ing coal from Venezuela to East Asia in tankers, andtransporting chemicals from Venezuela to East Asia

� Far east chokepoint: energy and foodcorridor� A green corridor

� Far east chokepoint: energy and food corridor� A green corridor� Will specialise in handling containerships

and tankers

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information about the drivers as well as descriptions of the scenar-ios and the possible roles and consequences for both canals. Theroles of each canal differ according to the particular scenario.

4.1. First scenario: the Green Gold Scenario

In the ‘‘Green Gold Scenario’’, countries will emphasise theboosting of national economic development and will fight againstenvironment deterioration by global cooperation (IEA, 2009). Everycountry will tend to promote green growth (Sterner and Damon,2011; Janicke, 2012). The consideration of political security willbe lessened. Globalisation will enable countries to magnify theircompetitive advantages by specialisation. Developed countries willmaximise the development of their national economies by stimu-lating international trade with resource-saving technologies,whereas developing countries will tend to manufacture on a largescale to enjoy the benefits generated from economies of scale andraw material savings through ecodesign (Aranda-Uson et al., 2012;Larsen et al., 2012; Janicke, 2012).

Also in this scenario, the awareness of low carbon emissionswill increase, and carbon taxes will be imposed to further sharethe emission responsibilities embodied in imported products.Developed countries will further share responsibilities to create aworld-wide energy system with zero net carbon emissions byexporting their low-carbon technologies and economic invest-ment, for example, through the Clean Development Mechanism(CDM) (Haites, 2009; Stonchniol, 2009; Lewis, 2010; DeCanio andFremstad, 2011). The efficiencies of manufacturing and transporta-tion will be improved (Mallidis et al., 2012), and energy consump-tion mix will be changed by replacing cheap fossil fuel withrenewables (Gustavsson et al., 2007; Geurs et al., 2011; Sternerand Damon, 2011). Energy efficiency will be further improved byupgrading end-use technologies. The low-carbon economy willultimately be formed (DeCanio and Fremstad, 2011).

4.1.1. Implications for maritime and international tradeLow carbon emissions will generate and maintain economic

development in both developing and developed countries. Becausethe ten countries of the Association of Southeast Asian Nations(ASEAN) and China will be manufacturing centres, these develop-ing countries will play an important role in the energy market,

given their huge energy consumption. Low price will no longerbe the sole consideration for developed (importing) countries;rather, the emission intensities of manufacturing and productionwill be critical factors. Therefore, the developing (exporting) coun-tries (i.e., ASEAN and China) will maintain a comparative advan-tage by minimising the carbon emissions of products in bothmanufacturing and transportation. These developing countries willchange their energy consumption mix by adopting a higher shareof clean energy, such as renewable energy from both local andinternational sources (IEA, 2009). There will be a boom in clean-energy trade in the global market, for example, ethanol exportedfrom Brazil to China. We argue that the energy trade between Bra-zil and China does not currently flow through Panama Canal butwill do so in 20 years time.

In addition to the above, the distances between trading partnersand transport modes used (Chapman, 2007; Geurs et al., 2011) willbe factors in the development of the international trade market.Countries will tend to import products from neighbouring countiesby using the most environmentally friendly transport modes, suchas rail and shipping. Maritime transport will become more domi-nant in international trade by taking over the role of air transport.To take further advantage of the low-carbon opportunities, ship-ping lines will tend to use larger vessels with environmentallyfriendly designs to benefit from economies of scale for both eco-nomic and environmental benefits (Cullinane and Khanna, 2000;Imai et al., 2006), whereas the hub-and-spoke system will be cho-sen to maximise operational efficiencies. A review of the evolutionof vessel size, including tankers, bulk carriers, and containerships,shows that ships have increased in size according to advances intechnology, as well as when new regulations became establishedand economic competition became more intense. The sizes of bothbulk carriers and tankers increased during the 1960s and 1970s,and the largest bulk carriers (Capesize) and tankers (ULCC) wereavailable by the late 1960s (Table 3). Although the increase inthe size of containerships has accelerated in the last two decades,it takes about 10 years on average to develop a new generation ofcontainership. The largest containership available in the existingmarket is Triple E, measuring 18,000 TEU. The increase in contai-nership size will pause at 20,000 TEUs in 2020 because of thecapacity and depth limitations of container ports (DNV, 2012). Areview of the ship statistics of major liner companies shows that

Table 3aEvolution of containership size. Sources: Various.

Generation Generation Year TEU LOA (m) Beam (m) Draft (m)

1st Generation Early containerships 1956 500–800 137 17 9Fully cellular 1970 1000–2500 200 20 9

2nd Generation Panamax 1980 3000–3400 215 20 10Panamax Max 1985 3400–4500 250 32 12.5

3rd Generation Post Panamax 1988 4000–5000 290 32 12.5Post Panamax Plus 2000 6000–8000 285 40 13

4th Generation New Panamax 2004 12,500 300 43 14.55th Generation Post New Panamax 2006 15,000 366 49 15.2

Triple E 2013 18,000 400 59 15.56th Generation 2020 20,000–25,000 440–450 59–61 16.5

Remarks: LOA stands for length overall; TEU stands for Twenty-Fleet Equivalent Unit, which is used to describe the capacity of a container ship.

Table 3bEvolution of bulk-carrier size. Sources: Various.

Generation Generation Year DWT LOA (m) Beam (m) Draft (m)

1st Generation Handysize 1960 28,500 169 27.2 102nd Generation Handymax 1965 50,000 190 32.2 12.63rd Generation Panamax 1970 76,300 225 32.2 12.24th Generation Capesize 1975 172,000 289 45.0 17.85th Generation Ultra Cape 1990 365,000 343 63.0 22.8

Remarks: DWT stands for deadweight tonnage, which is used to describe thecapacity of a cargo ship.

Table 3cEvolution of tanker size. Sources: Various.

Generation Generation Year DWT LOA (m) Beam (m) Draft (m)

1st Generation Panamax 1914 70,000 230 32.2 13.72nd Generation Aframax 1959 115,000 250 44 14.83rd Generation Suezmax 1963 155,500 274 47 174th Generation VLCC 1966 300,000 323 60 215th Generation ULCC 1968 400,000 380 68 24.5

Remarks: VLCC and ULCC stand for Very Large Crude Carrier and Ultra Large CrudeCarrier, respectively.

8 T.L. Yip, M.C. Wong / Journal of Transport Geography 43 (2015) 1–13

a range in ship size of 4500–10,000 TEU is the most commonlyused in the market, and that the actual ship size used dependson the water depth limitations, distance, and cargo volume of eachtrade route. Fuel combustion causes CO2 emissions, and thereforehigher levels of vessel fuel efficiency correspond to lower CO2

Fig. 4. Fuel consumption and EEDI assessment for typical containerships. Remark: EEDI sgram per tonne-nautical mile and gram CO2 per tonne-mile, respectively. Source: ABS (2

emissions. The Energy Efficiency Design Index (EEDI) wasintroduced by the International Maritime Organisation (IMO) in2012 and has been enforced since 2013 to measure and monitorthe minimum level of energy efficiency required for new ships(IMO, 2012). ABS (2013) published a guide to show the relationshipbetween ship size and CO2 emissions, and shows that larger shipshave better performance with respect to fuel consumption and CO2

emissions (Fig. 4). For example, an increase in containership sizefrom 4500 to 8000 TEU is associated with a reduction in fuel con-sumption of 25%, whereas an increase in containership size from8000 to 12,500 TEU is associated with a reduction in fuel consump-tion of 10%. Fuel consumption reductions diminish as vessel sizecontinues to increase above these values. To maintain competitive-ness, authorities of both ports and canals will launch green pro-grammes and will improve their capacities to encouragecompanies to use their services.

4.1.2. Possible roles of the Nicaragua CanalTo survive, both the Nicaragua and Panama Canals will need to

adapt to the global changes to fulfil the demands of the Green GoldScenario. Possible roles played by the canals include the following:

4.1.2.1. Green corridor. As energy consumption needs to beassessed along the whole supply chain, the Nicaragua Canalauthority will implement an environmental management system(Marlow and Gardner, 2006) and impose green policies or launchgreen programmes. Examples of such programmes could includea vessel speed reduction programme where vessel sailing speedswithin a defined number of nautical miles of the canal are encour-

tands for Energy Efficiency Design Index. The units of fuel consumption and EEDI are013).

T.L. Yip, M.C. Wong / Journal of Transport Geography 43 (2015) 1–13 9

aged to help lower vessel emission levels, and a clean fuels vesselincentive programme to encourage vessels to use clean fuel whenpassing through the canal. The canal will provide incentives byoffering discounts on passage dues. An energy management sys-tem adopted by the canal authorities can be considered as a com-parative advantage when public awareness of low carbonincreases. The green programmes will satisfy sustainable transportat the international level (Sambracos, 2003).

4.1.2.2. Large-vessel corridor. As shipping lines will deploy largervessels to enjoy economies of scale and environmental benefits(Cullinane and Khanna, 2000; Imai et al., 2006), the NicaraguaCanal will have sufficient water depth to accommodate bothPost-Panamax (about 12,000 TEU) and Ultra Large vessels (about18,000 TEU). The expanded Panama Canal will allow passage ofPost-Panamax vessels. The Nicaragua Canal will be more than250 m wide and more than 26 m deep, and will be able to manageUltra Large vessels. This, combined with the shorter distancebetween Asia and Europe offered by the canal compared with thePanama Canal, will lower CO2 emissions. The Nicaragua Canalcan specialise in servicing very large vessels.

4.1.2.3. Specialisation. Moreover, increased efficiency implies sav-ings in cost, time, and energy. Specialisation will improve the oper-ational efficiency of the Nicaragua Canal. The canal will focus onhandling specialised types of product, for example, as a bulk-spec-ialised canal, a tanker-specialised canal, or a containerisation-spec-ialised canal. The improvement in operational efficiency derivesnot only from equipment specialisation but also from minimisingerrors. High levels of operational efficiency will further enablethe canal to offer an unobstructed free-flow passage to vessels.The characteristics of the specialisations are as follows:

Bulk carrier specialisation� Moving coal as an energy resource from Venezuela to East Asia.� Moving iron ore from Brazil to East Asia.

Tanker specialisation� Moving crude oil and chemicals from Venezuela to East Asia as

raw materials for producing high-end electronic products.� Moving ecological products (e.g., biofuel as end-products of bio-

mass) as an energy source from Brazil to East Asia.

Containership specialisation� Moving high-end electronics products from East Asia to North

America.� Moving agricultural products (e.g., sugarcane and soybean) as

food or energy supply from Brazil to East Asia.

4.1.3. The reaction of the Panama CanalInstead of being in price competition, the Panama Canal and the

Nicaragua Canal will be complementary routes. The expansion pro-ject of the Panama Canal (2007–2015) will allow the transit of ves-sels of 49 m width, 366 m length, and 15 m draft, which isequivalent to a container ship carrying around 12,000 TEU. Thisexpansion means that the Panama Canal will very likely seize theopportunity to be a ‘‘large-vessel canal’’ and attract shipping linesto pass through the deepened channel with their post-Panamaxvessels rather than passing through the Atlantic and Pacific oceansvia the passage around Cape Horn at the tip of South America.Therefore, the customer base of the Panama Canal will widen toinclude post-Panamax vessels. Because the Panama Canal gaineda first-mover advantage, this canal will target more profitable shiptypes and specialise in handling containerships. The specialisationin liner shipping and advanced equipment will enable the Panama

Canal to become the logistics hub of the region, including NorthAmerica (Fan et al., 2009) and South America.

4.1.4. The counter-reaction of the Nicaragua CanalThe Nicaragua Canal as the second mover will adopt a more dra-

matic strategy than that taken by the Panama Canal. The NicaraguaCanal will fulfil the less profitable part of the market and offergreen services to attract shipping lines that emphasise the lowemission of CO2. The Nicaragua Canal will implement energy man-agement systems, impose green policies, and launch green pro-grammes, such as a vessel speed reduction programme and aclean fuels vessel incentive programme to attract low-carbon lin-ers passing through the canal.

In addition, the Nicaragua Canal will specialise in handling bulkvessels for moving coal from Venezuela to East Asia and tankervessels for moving chemicals as raw materials from Venezuela toEast Asia for producing high-end electronics products (Fig. 5).

4.2. Second scenario: the Split Green Scenario

In the second scenario, the ‘‘Split Green Scenario’’, environmen-tal issues will rise to the top of the political agenda, and countrieswill impose conservative environmental policies. Trade barrierswill be built based on different opinions on combating globalwarming. There will be two major groups of judgment on productconsumption: the progreen group and the antigreen group. Theantigreen group will shift emissions responsibility to exportingcountries; that is, nothing will be done regarding emissionsembodied in imported products. International trade will occur onlybetween countries that have similar beliefs regarding environmen-tal tendency. In other words, two trade groups will be formed.

Similar to the ‘‘Green Gold Scenario’’, developed countries in theprogreen group will maximise the development of their nationaleconomies by stimulating international trade with resource-savingtechnologies, whereas developing countries will tend to manufac-ture on a large scale to enjoy the benefits generated from econo-mies of scale and savings of raw materials through ecodesign.The progreen group will further share responsibilities to create aworld-wide energy system with zero net carbon emissions byexporting their low-carbon technologies and economic invest-ment, for example, through the Clean Development Mechanism.The European Union, Australia, and China will be the leaders ofthe progreen group, which will actively impose national regula-tions. Members of the progreen group will share the emissionsresponsibility embodied in trade by placing carbon taxes onimported products and by imposing carbon trading schemes.Within the progreen group, a green supply chain will be designed.The energy consumption mix will be dominated by renewableenergy. The operations of these countries will be further updatedto cooperate with energy-efficient technologies. The low-carboneconomy will ultimately be formed.

In the antigreen group, developed countries will maximise thedevelopment of their national economies by stimulating interna-tional trade with a profit-maximising strategy. Japan, America,Russia, and Canada will be the leaders of the antigreen group asthey withdrew from the Kyoto Protocol.

Developing countries will maintain their economic develop-ment by adapting and adjusting to the differing preferences ofthe two groups.

4.2.1. Implications for maritime and international tradeProgreen developing countries, such as China, will develop a

market niche by manufacturing ecoproducts for trading with theEuropean Union and Australia. An environmental dialogue will beopened between countries having similar viewpoints regardingenvironmental protection. Progreen developing countries will

Fig. 5. Possible trade routes through the Nicaragua Canal. Source: Google Maps.

10 T.L. Yip, M.C. Wong / Journal of Transport Geography 43 (2015) 1–13

attract FDI from the European Union and Australia, who will sharetheir low-carbon technologies with, and import ecoproducts from,their partners. Those developing countries will emphasise low car-bon emissions along the supply chain, for example, by using clea-ner fuel and imposing an energy management system. China willswitch to cleaner fuel (from coal to natural gas and biomass) withthe support of the advanced technologies of the progreen group.Under the considerations of carbon intensity and energy security,China will restructure its energy consumption mix (Lin et al.,2012), substituting coal with imported renewable energy fromher partners, for example, imported biomass or biofuel from Brazil.Maritime transport will be boosted within the progreen group.They will develop a green supply chain, especially in the shippingindustry.

In contrast, the antigreen developing countries, such as India,will maintain advantage by minimising costs when trading withJapan, North America, Russia, and Canada. Such antigreen develop-ing countries will minimise costs by improving operational effi-ciency and enjoying economies of scale.

4.2.2. Possible roles of the Nicaragua Canal4.2.2.1. National chokepoint. The twofold division of approach toenvironmental protection will induce political arguments. The splitof trade groups according to political considerations will bringabout a separation of traffic. This separation of traffic will implythe creation of international chokepoints for transport for access-ing scarce resources, such as energy and food.

4.2.2.2. Green corridor. Environmental considerations represent oneof the trigger points for the separation of traffic. To attract the pro-green groups to use the Nicaragua Canal, the canal authoritiesshould implement an energy management system and imposegreen policies or launch a green programme, such as a vessel speedreduction programme and a clean fuels vessel incentive pro-gramme, as described further above. The canal will provide incen-tives by offering discounts on passage dues. The canal will developa market based on enabling countries to transport cargoes by min-imising carbon emissions from transport.

4.2.3. The reaction of the Panama CanalPolitical considerations will alter the role of the canals. The US

has had close diplomatic relations with Panama since 1903. ThePanama Canal will continue to have a close relationship with theUS, even though it became independent of the US in 1995(Llacer, 2004, 2005, 2006). The Panama Canal will offer the US ashortcut between the Atlantic and Pacific oceans, as well as beinga strategic point for the US.

4.2.4. The counter-reaction of the Nicaragua CanalThe US, India, and Japan will be seen as potential blockaders of

China, especially as they have different tendencies towards envi-ronmental protection. The transfer of energy and scarce materialswill be dependent on maritime transport, and canals and straitsare considered as chokepoints. It is dangerous if a country facesenergy insecurity caused by a maritime blockade or closure ofthe Panama Canal or the Indian Straits. China will consider devel-oping an alternative to prevent the possibility of maritime block-ades. A Chinese developer is investing in the construction of theNicaragua Canal, and the Chinese government will maintain a goodrelationship with the Nicaraguan government. Through the Nicara-gua Canal, China will extend its influence to South America via FDI.Therefore, South America will fight against maritime blockadesand will support the progreen group by supplying energy and foodto China. In addition, container imbalance is one of the largestproblems in maritime transport, and the Nicaragua Canal willallow a better balance to be achieved in container transport. Agri-cultural products, such as sugarcane and soybeans for food andenergy supplied by Brazil to China, can be transported in contain-ers, whereas biofuel, as an end-product of biomass supplied byBrazil to China, can be transported in tankers. In short, the Nicara-gua Canal will act as a green energy corridor for China (Fig. 5).

4.3. Third Scenario: the Gold Split Scenario

In the third scenario, the ‘‘Gold Split Scenario’’, countries willimpose a conservative trade policy. The rapid rise of China will upsetthe peaceful political relations (Mearsheimer, 2006; Ross, 2006).

T.L. Yip, M.C. Wong / Journal of Transport Geography 43 (2015) 1–13 11

This is being and will be worsened by a South China Sea crisis, whichmay last for more than 20 years (Hearns and Stormont, 1996;Kaplan, 2011). Countries will emphasise the development of theirnational economies, and the countries of Far East Asia will be split.Two ‘‘power groups’’ will be formed (Gradus, 1977), which will causedynamic changes in trade patterns. To boost national economicdevelopment and to maintain the supply of scarce resources, coun-tries will extend their political influence by offering FDI to develop-ing countries. As a result, ecopolitical groups will be formed, andinternational trade will be conducted within groups. China willstrengthen its relationship with the European Union and will expandinto new markets in South America; the economic development ofChina is likely to be maintained. Japan, the Philippines, and Vietnamwill continue their existing ecopolitical relationship with the US tomaintain their own economic development.

4.3.1. Implications for maritime and international tradeWithin the ecopolitical groups, countries will specialise in the

manufacturing of complementary products to maximise economicbenefits. To further minimise costs, large and specialised vesselswill be deployed for international trade. Shipping lines will decidethe routing that maximises the capacity of vessels for every sailing,and the trade routes that link complementary trading will favourliners.

4.3.2. The roles of the Nicaragua Canal4.3.2.1. National chokepoint. An individual country’s economic ben-efits may create political arguments between countries. The splitinto trade groups according to political considerations will inducea separation of traffic. This separation will in turn imply the crea-tion of national chokepoints for transport for accessing scarceresources, such as energy and food.

4.3.2.2. Specialisation. As shipping lines will deploy larger vessels toenjoy the benefits of economies of scale, the canal will need to havesufficient water depth to accommodate post-Panamax and verylarge vessels. Combined with the shortened distance (and timesaving) offered by the canal, transport costs will be lowered. Thecanal will specialise in servicing very large vessels. Specialisationwill improve the operational efficiency of the canal, which willbring both cost and time savings. The canal will focus on handlingspecialised types of product, for example, as a bulk-specialisedcanal, tanker-specialised canal, or containerisation-specialisedcanal. The improvement in operational efficiency will be derivednot only from equipment specialisation but also from the minimi-sation of errors. High levels of operational efficiency will furtherenable the canal to offer an unobstructed free-flow to vessels.

4.3.3. The reaction of the Panama CanalThe Panama Canal expansion project will allow the transit of

containerships carrying around 12,000 TEU. The expansion meansthat the Panama Canal will very likely be able to seize the oppor-tunity to be a large-vessel canal that attracts shipping lines to passthrough the deepened channel with their post-Panamax vesselsrather than passing through the Atlantic and the Pacific oceansvia the southern tip of South America. Therefore, the customer baseof the Panama Canal will be increased to include post-Panamaxvessels. The Panama Canal will specialise in handling large contai-nerships. The canal has a close relationship with the US, eventhough it has been independent of the US since 1995, and it is alsoa military strategic point for the US. The specialisation andadvanced equipment will enable the Panama Canal to becomethe logistics hub of North, South, and Central America.

4.3.4. The counter-reaction of the Nicaragua CanalThe US, India, and Japan will be seen as potential blockaders of

China, especially as they have different tendencies regarding

environmental protection. The transfer of energy and scarce mate-rials will be dependent mainly on maritime transport, and canalsand straits are considered as chokepoints. A maritime blockadeor closure of the Panama Canal or Indian Straits would pose signif-icant threats to the energy security of Far East countries, such asChina.

China will develop an alternative to prevent maritime block-ades. China will invest in the construction of the Nicaragua Canal,and the Chinese government will maintain a good relationshipwith the Nicaraguan government. Through the Nicaragua Canal,China will access and extend its influence to South America byimplementing FDI. Therefore, South America will fight againstthe maritime blockade and support the progreen group by supply-ing energy and food to China. This means that the Nicaragua Canalwill be used to move agricultural products, such as sugarcane andsoybean as food or energy, from Brazil to China by containerships,whereas coal will be moved from Venezuela to China (Fig. 5).

Besides energy and food, South America will also supply rawmaterials to China, and China will export finished products (suchas textiles and electronic goods) to South America. Therefore, spec-ialised hub ports for containers or tankers will be developed inboth South America and China to facilitate trade and maximiseoperation efficiency:

Containerships� Moving high-end electronics products from East Asia to South

America and Canada.� Moving agriculture products (e.g., sugarcane and soybean as

food or energy supply) from Brazil to East Asia.

Tankers� Moving chemicals as raw materials for producing high-end

electronics products from Venezuela to East Asia.� Moving ecological products (e.g., biofuel as end-products of bio-

mass) from Brazil to East Asia.

5. Implications

This study represents the first attempt to conceptually investi-gate the potential roles of the new Nicaragua Canal in the presenceof the competing Panama Canal. Generally speaking, the proposedNicaragua Canal will make the world more integrated via the mar-itime transport network.

This research has used scenario planning as a methodologicalapproach to gain new insights into the potential roles of the Nica-ragua Canal under three different dominant scenarios constructedwith different driver contents. Our analysis indicates that the newNicaragua Canal will complement the Panama Canal in the interna-tional maritime transport network. These two canals may separatetraffic on the basis of ship type, and therefore the efficiency ofcanal transits will be enhanced. They may separate the traffic ofcargo types, and thus the safety of canal transits will be improved.Currently, the presence of different ship types and sizes imposesnavigational and pollution hazards in the Panama Canal that makeit essential for speed to be reduced for safety reasons (Llacer,2004). If the Nicaragua Canal and Panama Canal separate the traf-fic, this would improve maritime safety and reduce the risks of col-lision and subsequent pollution. The separation of traffic could bean effective way of managing the traffic flows in both canals, espe-cially at times when the traffic would otherwise become verycongested.

Our analysis found that the Nicaragua Canal will particularlystrengthen the connection between Far East Asia and the easterncoast of South America, and become an energy corridor for theFar East. South American countries will export iron ore, crude oil,and other resources, whereas China and other Far East Asian

12 T.L. Yip, M.C. Wong / Journal of Transport Geography 43 (2015) 1–13

countries will export finished and semifinished products. AlthoughSouth American and Far East Asian countries have some competi-tive exports, export differentiation will show a high potential formutual trade between the two regions. In addition, the new Nica-ragua Canal will reduce the barriers to trade between the tworegions.

The drivers behind the identified scenarios are assumed to bepolitical, economic, and environmental. For other objectives, amix of different drivers may be established for further investiga-tion and analysis, which may enable the Nicaragua Canal to bemodelled as providing different contributions to the world. Evenunder different scenarios, large net benefits are likely to occur fromthis new canal.

6. Conclusion and future research

This study has used an intuitive and descriptive method todevelop scenarios regarding trade and maritime transport whenthe planned Nicaragua Canal is operational. Three drivers, namelypolitics, economics, and environment, have been taken into consid-eration. The study has reviewed micro- and macrochanges in sea-borne trade and indicated the possible scenarios arising as a resultof the development of the Nicaragua Canal. The impact of the pro-posed Nicaragua Canal strictly applies to a region and not to oneparticular country. However, China is specifically highlighted giventhe Chinese investment in the project, and given that the canal maybring obvious opportunities to China because of the country’saggressive development strategy: China’s clear strategies in thepolitical, economic, and environmental spheres enabled this studyto have better direction.

Waterborne traffic is of great importance in influencing geo-graphical patterns of trade and production. With the new interoce-anic canal, substantial changes in shipping activities are likely tooccur. In the present study, we are able to conceptually investigatethe possible future roles of the new Nicaragua Canal in the pres-ence of the competing Panama Canal. The study allows novelinsights about the future to be explored that demonstrate the cau-sal relationships between drivers. Moreover, the study providesuseful information that may help shape policy regarding the devel-opment of the Nicaragua Canal.

This study has used a macro approach that was orientedtowards the global/international scale. The regional contexts, suchas that of South America, deserve further investigation. A futurestudy could incorporate a game theory model when the necessaryinformation becomes available. Such a model could further analysethe economic conflict between the Nicaragua and Panama Canals,and more specific results could be generated regarding competi-tion, substitution, complementation, and/or cooperation betweenrival canals.

The reaction of other competitors such as the Suez Canal andthe US intermodal system will also be very interesting. Scenariosincorporating competitors would be very complicated and thefocus would be removed from the bilateral comparison betweenthe two canals made in the present study. Certainly, however, mul-ticompetitor scenarios could be investigated in a future researchstudy that takes a broader/different view of competitors andcompetition.

Acknowledgements

The work described in this presentation was partially supportedby a grant from the Research Grants Council of the Hong Kong Spe-cial Administrative Region, China (Project No. PolyU 5300/12E).The authors express gratitude for the helpful comments receivedat the International Forum on Shipping, Ports and Airports (IFSPA)

2013. We thank the Editor and the referees for their constructiveand perceptive comments.

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