Deepening the Port of Charleston

by Daniel Bunn

In 2004, the Port of Charleston took its inner harbor to a depth of 45 feet making it the deepest port in the South Atlantic. Since that time, the port has risen to become the 8th most active U.S. port as measured by the dollar value of goods handled. However, with the ever-constant forces of globalization and technological progress at work, it is now necessary for the port to be dredged to a depth of 50 feet. The simple reason for this is that bigger ships are on their way. Even the Panama Canal is being altered to accommodate larger container ships. Although a difference of 5 feet might not sound like much, this change is important for allowing some of the larger container ships into the port. Technically speaking, the economies of scale that are at work in the shipping industry are going to continue to be accommodated by the Charleston port.

The potential economic impact of this deepening project is hard to measure, so it is simplest to look at the level of activity supported by the current port and use that as a baseline to project a general expansion on this base. The 2008 Economic Impact Study completed by the South Carolina State Ports Authority found that 10.9% of state jobs are supported by port-related activity. The location of this activity is represented in the figure below taken from that report.

Just within the state, there is an obvious clustering of port-related activity in the Northwest corner particularly along Interstate Highway 85. What is interesting about this corridor is that it is becoming less and less of an independent economic region as it becomes more and more integrated with the cities of Charlotte, NC, and Atlanta, GA, both of which are very large centers of economic activity for the Southeast US. So, it’s entirely possible that even if the port did not exist, there would still be a higher level of concentrated economic activity in the Piedmont region.

Now back to the port.

If the port of Charleston supports so much activity in the Northwest corner of South Carolina, then it can be assumed that the deepening project will simply increase the amount of activity in this region and along with international trade-related activities, other intermediate functions will arise such as financing and non-tradable services. This is because a deeper port that can accommodate larger ships that bring more goods in and out of South Carolina and, in particular, the Piedmont region, will facilitate an increase of the level of economic activity as well as the amount of concentration in the Northwest part of the state. Though it is difficult to say how quickly these effects will take place (the deepening project is not due to be completed for another 10-13 years) it is certain that increased trade-related activity will appear even before the project is completed.

Some other factors to consider when determining what the impact of this project will be include the widening and deepening of the Panama Canal, the joint effort between Georgia and South Carolina to establish another port on the Savannah river in Jasper County, SC, as well as the deepening of the port in Savannah, GA. These four things, including the deepening of the port in Charleston, will surely have a large combined impact on the states of South Carolina and Georgia with the largest impact within the state of South Carolina falling in the Northwest corner as the Atlanta and Charlotte economic areas spill over into the cities of Greenville and Spartanburg.

With Paul Krugman’s economic geography model and its extensions in mind, I believe that the lower costs of trade faced by market participants in this area will probably lead to stronger forces of agglomeration with a continual increase in the size of the agglomerated area. Perhaps, as the trade costs continue to fall, the city of Charleston will expand its role as a location for facilitating trade rather than an economic center in and of itself. However, the small towns in South Carolina will probably continue to shrink as the spreading of economic activity continues to decline.