Don C. Brunell: Watch South Carolina Closely

Washington leaders need to keep an eye on South Carolina. It is a state which is becoming a strong magnet to attract business.

A couple of years ago, the front page news was the competition between Seattle and Charleston to lure Boeing’s 787 assembly production. Now, it has grown to include international trade and the associated economic development and jobs.

Washington and South Carolina are among our nation’s leaders in international trade. Our state’s ports process roughly $150 billion in imported and exported products annually and 40 percent of all Washington jobs are tied to international trade.

Meanwhile, South Carolina is now up to $40 billion in export sales and has become the nation’s top exporter of motorized vehicles, tires and lawnmowers.

Today, South Carolina stands to gain from the newly expanded Panama Canal which is now open. If we are not careful, their gain could be our loss.

Vessel traffic is moving with more efficiency since the canal’s increased capacity. As important, the size of ships which can navigate between the Atlantic and Pacific oceans is 2.5 times greater.

Larger ships carrying up to 14,000 containers now can bypass west coast ports and economically sail directly to Charleston.

In past years, although sea transport was generally cheaper compared to sea-rail shipping, it took more time. Traditionally, container ships steamed into west coast ports and their cargo arrived and departed by train and truck.

However, the lower shipping costs to the East Coast make our ports venerable, especially in a sluggish economy. Compressed shipping time and larger loads often lower costs to the point where they are overriding factors for shipping destinations.

Forbes cautioned last year that western railroads, such as BNSF and Union Pacific, could lose substantial shipping volumes from the new canal opening. Their loss would be offset by gains for eastern railroads such as Norfolk Southern, CN and CSX.

The expanded canal has triggered a race to improve port facilities. The bottom line is manufacturers and shipping companies will not come if port infrastructure is inadequate and railroads and highways are overly congested. Delays are costly.

It is high-stakes competition among ports and their partners. The American Association of Port Authorities calculates its members are spending $9 billion a year to modernize and expand port facilities.

AAPA estimates there are 125 port-related infrastructure projects underway or planned. They are cumulatively value at $29 billion and except for on-dock rail, these projects are mostly improvements outside of port facilities. These include highways and rail corridors.

The Ports of Seattle and Tacoma formed an alliance, and both are investing in facilities to dock the mega container ships. Those carry between 18,000 and 20,000 containers and need a draft (water depth) of 60 feet.

The Port of Charleston is spending $1.6 billion to dock even the world’s largest container ships. A third of that cost is dredging. Once completed, the Charleston Harbor will be the deepest on the east coast.

Containers are important for manufacturers, but they must arrive on time to fit into the order sequence. South Carolina officials recognized this and use it to recruit auto manufacturing.

It has landed 250 automotive companies with a series of low corporate taxes, port volume and worker training tax credits, expedited permitting and developable property for factories, affordable housing and warehouses.

Today, the automotive impact on South Carolina’s economy is estimated at $27 billion each year and accounts for 33,000 jobs, according to the state’s commerce department. At last estimate, Boeing had 9,000 workers at its Charleston facility.

The expanded Panama Canal is just one more “game changer” our elected leaders must not ignore.

(Don C. Brunell is a business analyst, writer and columnist. He recently retired as president of the Association of Washington Business He now lives in Vancouver.)