Signed in June 2007 by then President George
W. Bush, and passed by Congress in October 2011, under President Barack Obama,
a free-trade agreement between the United States and Panama has finally gone
into effect. This is the third such agreement to be realized under the Obama
Administration within a year of its signing. This agreement will immediately
reduce or eliminate tariffs on U.S. industrial goods and about 86% of the
country’s consumer and industrial exports to Panama will instantly become
duty-free. The remaining tariffs on agricultural, consumer, and industrial
products will be eliminated over the next 15 years. This agreement also
supports Panama’s development and economy by eradicating taxes on the country’s
exports to the United States. The U.S. is Panama’s largest trading partner,
although the two countries share a long history, linked to the Panama Canal.
The agreement with Panama, the offshore incorporation , positions the
U.S. in a substantially greater light as the deal provides much greater access
to Panama’s services market, which is estimated to be valued between $21 and
$22 billion, as well as infrastructure projects that are estimated to be
another $15 billion. The agreement guarantees the U.S. access to Panama’s
service industry, including areas such as finance, telecommunications,
professional services, and energy.
Advocates of the agreement believe that Panama’s strategic location will serve
only to boost trade and economic growth throughout the United States and the
Western Hemisphere as a whole. While the coverage of the agreement does not
include the domestic business opportunities that are connected to the Panama Canal’s
widening project, expected to be complete in 2015, there are still advantages
to aligning the U.S.’s resources with an offshore incorporation so closely tied
to the Panama Canal, where more than two-thirds of the annual transits are
either heading towards or from U.S. ports.
While exports of U.S. goods to Panama were $8.2 billion in 2011, some opponents
of the agreement argue that the trade deal weakens the U.S. government’s
ability to prevent large corporations and affluent citizens from circumventing
tax laws in Panama, while simultaneously failing to offer export development
opportunities.
Some are applauding the free-trade agreement as a significant milestone in the
relationship between the countries, stating that it reinforces fiscal ties and
more strongly establishes a tactical partnership between the nations as vital
allies. Furthermore, supporters of the deal note its solid protections of the
environment and workers’ rights. The agreement is also substantially aligned
with President Obama’s plan to double U.S. exports by the end of 2014. However,
critics of the deal fear it could destroy more U.S. jobs than it creates. Some
state that the agreement may actually contain a loophole that allows the
country to block requests for tax information about U.S. companies and
citizens.
Whether champion of the plan or not, the agreement will undoubtedly ease
bilateral trade between the United States and Panama while helping to support
the infrastructure of the Latin American offshore incorporation as well as in
the U.S.
Panama’s economy was among the fastest growing in Latin America and continued
growth is anticipated. In 2011, Panama’s economy expanded by nearly 11%. Over
the next five years, it is expected to continuously swell at a rate of nearly
five to eight percent per year. Last year, the U.S. exported nearly $347
billion in goods to Panama, which is a 54% increase since 2009. Compared with
the average 36% growth rate of exports to other countries, the agreement with
Panama was well-timed and can only serve to foster relations between the
countries.
