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Northwest Passage: The Future of Shipping Has Arrived

A decade has passed since the first commercial ship traversed the Northwest Passage. With countries looking for new shipping routes, or diversification of already existing routes, what will happen to the Northwest Passage?

The political and diplomatic implications of the Northwest Passage are far simpler and more predictable than the economic and environmental impacts. These impacts are still hard to predict, and could easily change.

Without a doubt,  the opening up of this shipping route will provide the most benefits for shipping companies, the countries situated along the route, and to a lesser extent, the consumers of shipped goods.

Northwest Passage extends 1,450 kilometres in the Canadian Arctic. Two countries – USA and Canada, claim rights to this route. Countries which claim the territory of the passage and the rights to it will experience a modest growth in political power.

The countries which claim rights to the world’s most important shipping routes have been able to use this claim to advance their goals. For example, Djibouti, which possesses one side of territorial waters of the Bab-el-Mandeb, has enjoyed a growing geopolitical influence. Iran, which wields influence over the strait of Hormuz, has the power of threatening to cut off access to the route multiple times.

The main goals of Canadian foreign relations centre around peacekeeping, protection of Canadian wealth and trade opportunities. Canada has managed to move forward with some goals, but has experienced some difficulties with others. A growth in bargaining power because of the Northwest Passage’s importance to world trade will cause Canada to be able to wield more influence. Particularly, against countries most interested in using the passage.

United States and China are top world’s exporters and users of the Panama canal. China has already expressed interest in using the Northwest Passage for shipping. If the goals of Canada won’t change radically in the next decade, the territorial claim of the passage will be a moderate help in any negotiations with China and other world’s top exporters.

The local villages situated along the passage, could theoretically derive some benefits from increased shipping through a development of marine services industry. Shipping companies, especially those whose ships frequently use the Panama canal, stand to benefit from the Northwest Passage. Shipping from East to West coast of USA, and shipping from East and Southeast Asian countries into Europe, could become far cheaper and less fuel-consumptive because of the shortcut the passage provides.

The Northwest Passage has long been viewed as an alternative to the Panama canal. Companies whose operations are based around the canal, and a part of Panama’s services industry, are likely to be hit the hardest. Panama’s economy still strongly relies on the incomes of its world-famous canal. Without a doubt, the reduction of the $3.172B revenue per year, and the source that constitutes around 10% of the country’s GDP, will bring some tension into Panama’s economy.

Increased shipping through the Northwest Passage is bound to bring both positive and negative environmental impacts. So far, the main theories about possible negative impacts centre around the indigenous fauna and the aquatic resources.

The Northwest Passage goes through many protected areas. These include the Auyuittuq National Park and Sirmilik National Park. They are home to many native species, and ones which have a very large influence on the local ecosystems.

The passage, even with low traffic numbers, saw many accidents related to grounding and damage to vessels. The Arctic Council, already in 2009, determined that spills would be a major threat. Even worse news is that colder temperatures make any clean-up efforts harder.

Positive environmental impacts of this route should mostly benefit the world at large, and countries from which shipping will be diverted due to the new passage. With shipping routes, there are always ways to make money from them either directly or indirectly. Currently, crossing the Northwest Passage can be done through three maritime route; one diverges just before Victoria island, and two others at the Banks island. Theoretically, there is a better route – only it would require the creation of a channel.

If commercial ships didn’t turn north at the King William Island, and instead sailed east, a channel through Taloyoak would reduce the length of a journey. Moreover, crossing from Taloyoak to Igloolik in the east, would completely bypass the Baffin Bay in the north, and save fuel for ships heading to the east coast of America.

36.61 kilometres of a channel in the Arctic, even in the near future, would be an irrational idea for Canada. Yet, Canada already has plans to build a deepwater port in the remote territory of Nunavut, Iqaluit.

The passage through the Canadian Arctic will make a sizeable impact on the global and some local economies. Out of over 13,000 ships crossing the Panama Canal every year, most cross because of Asia to East coast USA deliveries. Due to the canal’s large contribution to the Panamanian GDP, the loss of this traffic would be hard to cope with financially.

Exporting companies, using the routes through the Pacific, and onto the Atlantic Ocean, could see their shipping costs diminish. The same should be true for importers of goods from the Atlantic-Pacific routes. Countries where the exporting and importing businesses are located, could see lower prices of goods because of decreased shipping costs for businesses.

A shipment from Shanghai to New York, through the Panama canal, has to travel 31,651 kilometres. In contrast, a shipment from Shanghai to New York, through the Northwest Passage, has to travel just approximately 15,000 kilometres. By taking in consideration fuel costs, the Northwest Passage could save up at least $500 for every tonne shipped (assuming 50% of shipping costs come from fuel). This would likely lead to lower prices of goods, and possibly, higher consumption.

Faster and cheaper shipping has boosted the world’s trade. With rising labour costs, cheaper shipping becomes a solution to keeping the prices of some goods at the same level. The cheaper shipping, because of a shorter route through the Northwest Passage, will keep costs lower. Yet, for the indigenous species of the passage and the ecosystems, increased maritime traffic could become a large problem.