USINFO | 21 December 2006
Panama Added To Roster of U.S. Free-Trade Deals in Latin America
The United States has reached a free-trade agreement (FTA) with Panama that promises to boost trade and investment flows between the two nations and expand the reach of U.S. bilateral FTAs in Latin America.
"The historic agreement between two good friends and close partners will promote economic growth and development in both of our countries," said U.S. Trade Representative (USTR) Susan Schwab, who announced the deal December 19.
Schwab said, however, that the agreement is subject to "additional discussions" on labor.
Labor and environmental issues related to FTAs have proved to be controversial in the U.S. Congress, which now must approve the agreement. Democrats, who now control both the Senate and House of Representatives, generally have supported stronger labor and environmental provisions than those negotiated by the administration.
In addition to the agreement with Panama, the new Congress will need to address similar deals with Colombia and Peru when it convenes in January 2007.
"We strongly support the agreement and urge both legislatures to give it a resounding yes," said Eric Farnsworth, vice president of the Council of the Americas. The council is a business group promoting democracy, open markets, and the rule of law throughout the Americas.
Farnsworth said that, on the 17th anniversary of Operation Just Cause (the U.S. invasion of Panama), the current deal "neatly encapsulates the evolving and maturing U.S. relationship with Latin America."
KEY ELEMENTS OF AGREEMENT
In the near term, passage of the accord is not likely to affect trade flows from Panama significantly because 95 percent of Panamanian exports already enjoy duty-free access to the U.S. market.
The FTA, however, would "expand and secure" for the long term those benefits, which now require periodic congressional approval, according to a news release issued by the USTR office.
In addition, Panama would be able to export duty-free to the U.S. market nearly all of its sugar production compared with three-quarters of its output now, according the American Sugar Alliance. The sugar provision is considered by trade experts a win for Panama because the United States limits sugar imports to keep domestic prices higher than those set in world markets.
U.S. sugar producers, who in 2005 lobbied against the U.S.-Central American Free Trade Agreement (CAFTA) because the countries involved also are sugar-producers, have said they are not opposed to the FTA with Panama, according to the alliance.
In addition, according to a U.S. trade official, the new FTA would guarantee that Panama’s construction firms receive 10 percent of the contracts to modernize and expand the Panama Canal, which until 1999 was U.S. territory. Under the deal, U.S. companies also would have an opportunity to participate in the undertaking, which the U.S. Chamber of Commerce calls "one of the most important infrastructure projects in the hemisphere".
In October, the Panamanians approved in a referendum the $5.3 billion canal expansion plan, which would double its capacity and enable larger ships to cross between the Atlantic and Pacific oceans.
The agreement also would put U.S.-Panamanian trade "on a reciprocal, mutually beneficial footing", said Dan Christman, vice president of the U.S. Chamber of Commerce, the largest U.S. business lobbying group in a news release.
More than 88 percent of U.S. exports of consumer and industrial goods to Panama would become duty-free immediately, with remaining tariffs phased out over 10 years. Panama also would expand market access substantially across the entire range of services, including financial services.
More than half of all U.S. farm exports to Panama would become duty-free once the FTA enters into force and tariffs on remaining agricultural products would be phased out within 15 years, according to a prepared statement by U.S. Agricultural Secretary Mike Johanns.