Problems in Panama – Free Trade Agreement Not Ready for Prime Time

Republicans on the House Ways & Means Trade Subcommittee were told yesterday that the problems with the proposed Panama Free Trade Agreement lie with the government of that Central American nation and not in Washington. Ambassador Miriam Sapiro, the deputy U.S. trade representative testified that a tax information exchange agreement or TIA, which was signed by the U.S. and Panama back in November, must first be approved by the Panama National Assembly before the Obama administration will submit the pact to Congress. “The ball is really in their court right now,” Sapiro said, adding that she hoped the TIA would get finalized before the April recess of the Panama legislature. The TIA would allow both countries to seek and exchange bank account data because of Panama’s history as a tax haven. The Organization for Economic Cooperation and Development has Panama on a list of nations that must share tax information or face sanctions as the Group of 20 cracks down on banking secrecy. The subcommittee’s ranking Democrat, Jim McDermott of Washington, told Sapiro that “our trading partners should not operate as tax havens.” Although the proposed Panama deal is smaller than the Korea and Colombia FTAs, Panama’s economy is one of the fastest growing in Central America, with a six percent growth spurt last year. A $5 billion expansion of the Panama Canal, to be completed in 2014, has American firms drooling about big infrastructure contracts and the CEO of Caterpillar Inc. said yesterday that he wants to sell more heavy equipment to the Panamanians. As the panel’s Republicans pushed Sapiro on whether the agreement could be ready by April or May, she noted that in addition to the TIA matter, a number of labor protection issues must also be reformed by Panama. The list includes enforcement of labor laws, right to strike, collective bargaining and labor inspections in the maritime and construction sectors.