Melting Ice Caps: Implications for Asia-North America Linkages and the Panama Canal

Arctic ice caps have been melting at an increased pace and projected climate changes imply that the extension of the Arctic ice caps will be greatly reduced in the near future. This climatic phenomenon will open up shipping routes in the Arctic. Until now, media and academic attention has centered on the use of the Northern Sea Route that will connect Northeast Asia with Northwestern Europe and affect the traffic through the Suez Canal (cf. Francois and Rojas-Romagosa, 2015). However, melting Arctic ice caps will also make the North West Route (NWR) a feasible trade route for high volume commercial traffic. This route will reduce the shipping distances between Northeast Asia with the East Coast of the United States and Canada. In this paper we analyze the commercial feasibility of the NWR and the economic impact of reducing the trade distances between Asia and the United States. In particular, we expect that the NWR will become a direct competitor with the Panama Canal for certain trade routes and this will have significant geopolitical implications linked to both a drop in traffic through the Panama Canal as well as changes in the global supply chains that currently link East Asia and the United States.