business & economy

Also in this section:
US-RP free trade rushes to ratification here, still uncertain in USA
First big canal expansion contract goes to canal administrator's relatives

Trying to attract tourists back to the USA

Persistent poverty
The Panama News readership figures
Business & Economy Briefs


Free trade pact rushes toward RP ratification, US approval in doubt

by Eric Jackson

On June 28 in Washington the United States and Panama signed a free trade agreement, which due to the controversial nature of that concept was renamed a "Trade Promotion Agreement," or by its Spanish initials "TPC."

At the signing ceremony US Trade Representative Susan B. Schwab hailed the benefits for the American side:

Because of existing trade preference programs, this trade agreement turns a one-way street into a two-way partnership. On the first day this agreement enters into effect, nearly 90 percent of US exports of consumer and industrial goods to Panama will become duty-free, with remaining tariffs phased-out over 10 years.

On the agricultural side, more than half of current US farm exports to Panama will become duty-free immediately upon entry into force of the agreement.

US service providers will also gain substantial benefits from this agreement, particularly in view of Panama’s predominantly service-based economy. The agreement will provide substantial market access to Panama’s entire services market, including financial services.

"We can say that had the best negotiation, which no other country had," Panamanian Vice President and Foreign Minister Samuel Lewis Navarro told legislators in a ceremony figuratively presenting the agreement for their perusal. He cited the elimination of US duties on Panamanian rice, chicken, pork, corn and salt as examples of this country's negotiating success.

Lewis Navarro did not mention that many farmers here are worried about having to compete with subsidized American rice and corn, and American meat and poultry fed subsidized grains. One American farm lobby, the US Grains Council, assessed the balance in the US-Panama deal as follows: "Upon implementation, tariff elimination under a nearly 300,000 ton (11.8 million bushel) corn tariff rate quota will grow three percent per year compounded, allowing the United States to capture overall demand growth in this market."

Many of Panama's agricultural duties will remain for awhile, but all will be gradually phased out over 10 years. There is no companion provision in the agreement to phase out US agricultural export subsidies.

There is, however, a clause that allows any changes in World Trade Organization rules that conflict with the US-Panama agreement to supersede this treaty's provisions. The Doha Round of WTO trade talks is stalled at the moment, precisely over the linked questions of agricultural product duties and farm subsidies.

Hurried procedure

The document, which counting its appendices but not counting the other treaties and laws to which it refers is some 1,200 pages long, is found online in English at While the agreement provides that "the English and Spanish texts of this agreement are equally authentic," this reporter could not find a Spanish version published anywhere and a number of critics of the agreement have complained that such debate as is being allowed is in the shallow context of nobody in Panama having been able to read the document. There was secrecy during the negotiation process that prevented legislators and most other Panamanian public officials from knowing the terms agreed prior to the June 28 signing. Although a preliminary draft had been released some days before, sections on labor and environmental standards were added and changes to intellectual property provisions were made in the final round of talks.

Immediately after the end of the legislative session on June 30 President Torrijos called a week-long special session to consider and approve the agreement, with final approval scheduled for July 11.

Three days of public hearings were held in which people who had not been given the opportunity to read the agreement commented on their specific concerns or general ideological predilections.

Because of the lack of a Spanish-language text and short time for comment, many Panamanian groups with concerns that would be affected did not testify at the hearings. For example, animal welfare and environmentalist groups allege that Ocean Embassy intends to capture wild dolphins in Panamanian waters for an export business, something that both the company and the Torrijos administration deny, and yet the treaty provides for the duty-free importation of Panamanian dolphins and whales into the United States.

The new labor and environmental provisions, inserted at the insistence of Democrats in the US Congress, are brief and vague. For example, it seems permissible to allow the Panamanian president's uncle a free pass to break the law against bulldozing mangrove forests. The treaty provides that a "Party shall not fail to effectively enforce its environmental laws, and its laws, regulations, and other measures to fulfill its obligations under the covered agreements, through a sustained or recurring course of action or inaction, in a manner affecting trade or investment between the Parties, after the date of entry into force of this Agreement." But if it's not repeated or if it's frequently repeated but doesn't directly affect US trade or investment, failure to enforce Panamanian environmental laws does not violate the treaty.

On July 9 the assembly's Foreign Affairs Committee unanimously approved the pact, with Vice Minister of Commerce and Industry Carmen Gisela Vergara attending the session and blasting many of the critics for failing to attend the hearings and testify about a document which they have not been allowed to read.

As this story was written an alliance of labor unions, farmer groups, leftists and other opponents of the Trade Promotion Agreement had called for a rally at the Legislative Palace on the afternoon of July 11, the day set for the final assembly vote on the question. One of the organizations opposing the deal, the liberation theology group Panama Profundo, had coined new words for the acronym TPC: "Todo Panama Colonizado" (All of Panama Colonized).

Regardless of any protests, Panama's ultimate ratification of the pact is not in doubt. The only question is whether final legislative approval will be unanimous, as the committee vote was.

In case that both Panama and the United States ratify and a new government in either of those countries decides the deal isn't worth it, either party can withdraw from the alliance with six months' notice. As a practical matter, however, once such agreements go into effect a series of economic ties are built predicated upon them and any rescission tends to become so disruptive as to be generally impractical.

US congressional support crumbling

Meanwhile in the United States relations between the Bush administration and the Democratic-controlled Congress are becoming ever more acrimonious and the political tide is shifting against free trade agreements in general, and that puts US ratification of the free trade pact with Panama that had been thought to be a sure thing in increasing doubt.

Just before the law authorizing "fast track" trade negotiating powers expired at the end of June, the Bush administration signed free trade deals with Colombia, South Korea, Peru and Panama. Congress declined to extend the fast track law, which might be renewed under a future administration but will not be so long as George W. Bush is president.

Prior to these four signings, Bush and Speaker of the US House of Representatives Nancy Pelosi had made a deal in which labor and environmental standards would be included in the treaties in exchange for Democratic support. But rather immediately House Democrats let it be known that whatever paper assurances might be given, the labor standard in Colombia is that government-aligned death squads murder union activists and for that reason the agreement with Colombia won't be approved. Then, particularly due to the urging of the United Auto Workers union, South Korean tariffs and other barriers that tends to exclude US-made cars were cited as the reason why House Democrats won't ratify the US-South Korean pact.

Next, House Ways and Means Committee chair Charles Rangel (D-NY) announced that in August he will travel to Peru and Panama to discuss changes in laws or other measures that must be taken in those countries in order to get the Democrats to approve the treaties.

US free trade advocates reacted with outrage and scorn. In an editorial entitled "Trade double cross," the Wall Street Journal alleged that "Mr. Rangel soon admitted privately to Treasury Secretary Hank Paulson that he couldn't deliver on the bargain after all."

The Washington Post, which also took a dim view of congressional opposition to fast track powers and specific free trade deals in an editorial entitled "Same Old Protectionism," allowed that "The Panama and Peru deals may still sneak through, although Mr. Rangel will be going to Lima and Panama City soon to discuss how those sovereign nations can change their laws to suit the US Congress," adding that "much bigger proposed agreements with Colombia and South Korea are dead."

Concurring with the Post, Congressional Quarterly opined that the deals with Panama and Peru are "expected to pass."

However, these were the expectations in early July and the votes will not be taken until September. Relations between the White House and the Democrats are, at this time, growing more tense by the day. There is the bitter debate over the Iraq War, in which many antiwar representatives and senators are hearing complaints from their constituents that they aren't militant enough. There are a number of explosive Capitol Hill investigations of alleged administration misconduct ongoing, to the extent that George W. Bush has taken recourse to the Richard Nixon playbook and claimed executive privilege to avoid committee subpoenas.

Were it just a matter of some unruly members of the Democratic caucus free traders on both side of the divide would ordinarily be expected to muster the votes to ratify the free trade agreements. But as the Huffington Post website reports, "the Republican Party faces a growing fissure among its rank-and-file on Capitol Hill over trade." The leakage is most notable in the GOP's Deep South stronghold, where a spokesman for Republican US Representative Terry Everett told The Birmingham News that "history has repeatedly shown that past trade bills have been poorly negotiated, failed to live up to their promise of promoting American jobs and were of little or no direct benefit to southeast Alabama."

Panama's small population may be the factor that saves the US-Panama Trade Promotion Agreement in Congress. We're a country of some three million souls with a predominantly service economy, and as such there will be few American politicians in a position to claim that this particular deal cost constituents their jobs.

Look for a debate that may get into issues not much discussed so far in the free trade negotiating process, and then for a close vote, in Washington in September.


Also in this section:

US-RP free trade rushes to ratification here, still uncertain in USA
First big canal expansion contract goes to canal administrator's relatives

Trying to attract tourists back to the USA

Persistent poverty
The Panama News readership figures
Business & Economy Briefs

News | Business | Editorial | Opinion | Letters | Arts | Review | Community | Fun | Travel
Unclassified Ads
| Calendar | Outdoors | Dining | Science | Sports | Español | Front Page
Wappin' Radio Show
| Just Music

Make the Executive Hotel your headquarters in Panama City ---
Find the boat of your dreams through Evermarine ---