Panama

The United States (US) and Panama announced on Tuesday, December 19, 2006 the completion of negotiations on a free trade agreement. Even though agriculture was the last item on the agenda of negotiations for a free trade agreement (FTA), it was left open for further discussions on labor. In the past Panama declined to join the Central American Common Market, and instead relied upon the canal and the US as its main economic anchors. Panama is also a beneficiary of US unilateral trade preferences defined in the Caribbean Basin Initiative.

If agreements with Columbia, Peru and Panama are ratified in 2007, the US will have FTAs with more than half of Latin America. Meanwhile, Ecuador has indicated an interest to negotiate a long term extension of trade preferences with the United States. In addition, Bolivia has lobbied Congress to extend trade preferences and expressed interest in considering a free trade agreement with the United States. With a new Democratic majority, leaders are demanding that agreements with Columbia and Peru be renegotiated to include stricter labor rights. Panama approached the US for a stand-alone FTA in order to avoid a direct link to the CAFTA-DR. On November 16, 2003 President George W. Bush formally notified Congress of his intent to negotiate a bilateral FTA with Panama. Since then negotiations have occurred sporadically due mainly to agriculture issues and Panama’s concern over losing control of a major expansion of the Panama Canal. Approval of the agricultural portion of the agreement was so controversial in Panama that an Agriculture Minister resigned in protest over it.

The agreement would give Panama’s sugar farmer’s greater access to US markets. More than half of all current US exports to Panama would be duty-free including high quality beef, turkey, mechanically deboned chicken, pet food and many processed foods. Some poultry items would be made immediately duty free while others, such as chicken leg quarters due to their sensitivity to Panama negotiators, would require an 18 year phase out period for tariffs and a gradual increase in the quotas. Also Included in the treaty is the revision of Panama’s sanitary and phytosanitary regulations recognizing the equivalence of the US food safety inspection system for meat, poultry and processed food items. Panama will also provide market access for all US beef, poultry and related products consistent with international standards. Included in the treaty was a clause that allows discretional decisions to allow or reject imports that put human health at risk. The agreement also streamlines import documentation for US processed foods and creates a dispute settlement mechanism.

The agreement also guarantees Panama's construction firms 10% of the contracts to expand the canal. The $5.25 billion expansion of the canal was approved by voters in October, 2006 and construction should begin in 2008 and finish in 2014. The project would double the canal's capacity and allow usage by larger ships, resulting in increased revenue to the government.
Source: various news sources

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