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US, Panama reach free-trade agreement : US official

Tue Dec 19, 2006

U.S., Panama reach free-trade agreement : U.S. official

By Doug Palmer

WASHINGTON (Reuters) — The United States and Panama have reached a free-trade agreement in talks delayed repeatedly by agricultural issues and Panama’s concern over losing control of a major Panama Canal expansion project, U.S. trade officials said on Tuesday.

The free trade pact tears down tariffs and other trade barriers between the two countries in manufacturing, services and other sectors.

It guarantees Panama’s construction firms a portion of the contracts in the $5.25 billion canal expansion and gives Panama’s sugar farmers greater access to U.S. markets. In return U.S. farmers will have more access to sales to Panama, and U.S. construction companies will have new opportunities to work on the canal project.

"This historic agreement between two good friends and close partners will promote economic growth and development in both of our countries," U.S. Trade Representative Susan Schwab said in a statement announcing the pact.

Panamanian officials also confirmed the deal.

The negotiations with Panama have proceeded in fits and starts since they began in 2004. Before negotiators reconvened late last week, the last formal round was in January.

A particular concern for the Panamanian government was they did not want to be seen as giving "back the canal to the Americans," a U.S. trade official told reporters.

Reflecting that concern, the talks were put on hold ahead of Panama’s referendum in October on the canal project, which voters overwhelming approved.

A special provision of the free trade agreement’s government procurement section allows Panama to set aside 10 percent of the contracts to expand the canal to Panamanian firms, the U.S. official said.

The project for the canal, which was U.S. territory until it was returned to Panama in 1999, will double its capacity to enable more and bigger ships to cross between the Atlantic and Pacific oceans, boosting Panama’s government revenues.

Three free-trade pacts — Panama, Colombia and Peru — await action when the new Democratic-led Congress meets in January.


Talks also snagged repeatedly on Panama’s concerns for its small but influential agricultural sector, particularly rice, pork and chicken producers.

In January, Panama’s then Agriculture Minister Laurentino Cortizo resigned in protest over the proposed agreement, which he said would expose Panama to a higher risk of importing animal diseases — a charge U.S. officials denied.

The two countries will sign an agreement on Tuesday that recognizes the U.S. meat inspection system is equivalent to Panama’s.

Neighboring Central America nations have already signed up to a regional free trade agreement with the United States.

As Panama’s economy is predominantly service-based with strong maritime and banking sectors, it sought its own bilateral deal with the United States.

In the final round, sugar had been a source of conflict as Panama’s tiny industry faces off major U.S interests.

The pact provides additional access to the U.S. market for 7,000 metric tons of Panamanian sugar through three separate tariff-rate quotes, some of which will increase over time.

That will allow duty-free access for all sugar output from Panama, which already sends three-quarters of its sugar to the United States, according to the American Sugar Alliance.

(Additional reporting by Michael Power in Panama City)

 source: Reuters