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 Panama and Taiwan sign free trade pact,
China steps up pressure for diplomatic switch

by Eric Jackson, largely from Taiwanese and Panamanian media sources


On August 21, at a Taipei summit that gathered the heads of state of the Republic of China (Taiwan), the Republic of Panama, the Central American republics and Belize, Presidents Mireya Moscoso and Chen Shui-bian signed a free trade treaty, the first of its kind for Taiwan and the biggest of its kind for Panama.

Taiwan’s 24 million inhabitants represent a large potential export market for Panama, a country of just under three million, but last year Panamanian exports to the island nation only amounted to a little more than $4.8 million. The Taiwanese, on the other hand, exported some $127 million worth of goods and services to Panama, much of which actually passed through Panama to third countries via the Colon Free Zone. If the legislatures of both countries approve the treaty as expected, beginning in January 6,200 categories of Taiwanese products, representing about 71 percent of its current exports to this country, will enter Panama duty-free, while Taiwanese duties on 4,160 categories of Panamanian products, representing about 48.5 percent of our exports to Taiwan, will be eliminated. By 2014 97 percent of Taiwanese exports to Panama and 95 percent of Panamanian exports to Taiwan will be duty-free.

Generally the industrially advanced Republic of China sells us manufactured goods and we sell them agricultural products. The free trade pact’s boosters in Panama are predicting an immediate sharp increase in this country’s exports of meat and poultry to Taiwan.

The most important Panamanian commodity that was left off of the duty- free list was rice. Taiwan will also retain duties on passenger vehicles and tobacco products that it might import by way of the Colon Free Zone.

There are skeptics on the Panamanian political scene, and Partido Popular president Rubén Arosemena has criticized the Moscoso administration for failing to publish the treaty or provide copies to the legislators who are expected to approve it. The treaty text is, however, available in PDF format in Spanish, Chinese and English on the Taiwanese government’s trade website.

For Taiwan, which is facing potential economic isolation in the face of mainland China’s overtures to all of Taiwan’s important trading partners, the treaty with Panama has an important symbolic value. Taiwan’s Vice-Minister of Economic Affairs Steve Chen told reporters in his country that his government hopes that the pact will encourage other countries to follow suit. Negotiations for free trade between Taiwan and Japan and Singapore are underway, but have been hampered by Chinese diplomatic pressures. During a recent trip to the United States, Taiwanese Vice-President Annette Lu’s request to visit Boeing was turned down by the company after China warned that it could negatively affect the company’s business prospects with the world’s most populous nation.

The Moscoso administration rather maladroitly tried to straddle the China- Taiwan divide by planning to send Vice-President Arturo Vallarino to China at the end of August. China has important economic relations with Panama, as many of its exports to Latin America and the Caribbean are wholesaled out of the Colon Free Zone and much of its commerce with Atlantic side of the Americas and Western Europe passes through the canal. However, Beijing demands that Panama break diplomatic relations with Taiwan as the price of normal relations with China, something that Panama has resisted for many years. The Vallarino mission, however, didn’t go over well in Taiwan, where legislator Parris Chang ridiculed Moscoso’s claim that she “couldn’t control” Vallarino’s plans for a “personal visit” to the People’s Republic of China and blasted “the duplicitous strategy that Panama has practiced in recent years, shuttling between Taipei and Beijing to extort financial aid from both sides.” Ultimately Vallarino’s trip was canceled.

President Moscoso has said that Panama’s China policy won’t change in her administration, but it’s highly unlikely that the Arnulfista Party and its allies will win next May’s elections. Front-runner Martín Torrijos’s PRD is split on the issue of whether to maintain diplomatic relations with Taiwan or dump them in favor of ties with China, while the PRD’s junior coalition partner, the Partido Popular, favors China over Taiwan. The candidate currently occupying second place, Guillermo Endara, maintained ties with Taiwan during his 1989-1994 administration but says that if he’s elected again Panama’s China policy will be reviewed.

Panama’s Chinese community is split over the issue, with the longer- established elements tending to favor Taiwan and the more recent immigrants, most of whom come from the mainland, generally in favor of closer ties with the People’s Republic. The Panamanian labor movement, part of which is motivated by leftist ideology and consequent preferences that date back to the Chinese Civil War that left Mao Tse-tung in control of the mainland and Chiang Kai-shek holding out on Taiwan at the end of 1949, doesn’t think much of the Panama-Taiwan free trade pact. This country’s business leaders, some of whom are motivated by neo-liberal ideology and consequent preferences for anything with the “free trade” label affixed, are more divided than organized labor but generally favorable to the deal.

China, seeking to drive wedges into the political fissures, has in recent days matched Taiwan’s long-standing offer to finance the construction of a third set of Panama Canal locks and promised that if visa restrictions are eased visitors from the People’s Republic of China would provide a big boost for Panama’s tourism industry. “We believe that if Panama handles the [Taiwan] question adequately, normalization will take place,” the Chinese Foreign Ministry said in a press statement. But Taiwan’s Vice-President Lu, passing through Panama on a trip around Latin America, dismissed Beijing’s moves. “This attempt by Beijing is nothing surprising,” she said. “This has been their attitude for the past 50 years.”



Also in this section:
Business & Economy Briefs
Alemán's economic platform
The problem with investing the Social Security Fund
Panama-Taiwan Free trade pact signed
Arguments over shopping center permits


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