Panama’s WTO win: vindication or a shot across the bow?

cash wash
The WTO rejected Colombia’s “money laundering duty” on textiles, shoes and clothing imported via Panama — but they didn’t say that the money laundering doesn’t happen.

Panama’s win at the WTO still leaves an opening for money laundering duties

by Eric Jackson

And on-and-off decade-long trade battle between Panama and Colombia may have ended with a June 7 ruling by the World Trade Organization’s appeals panel in Geneva. WTO rules put maximum duties on textiles, clothing and shoes at between 35 and 40 percent, but Colombia applied a 10 percent plus more depending on a variety of factors formula on these products coming in via the Colon Free Zone, with the totals exceeding the allowed percentages. The Colombians argued that the prices of things going in and out of the Free Zone are often unrelated to market value, with nominal values set very low for money laundering transactions in which profit or loss in the supposed business doesn’t really matter. Buy low and sell high and you can make a lot of money, and write make-believe billings that purport that this is what’s happening and you can launder a lot of money. The Colombians claimed that their national footwear, cloth and needle trades sectors were getting hammered but such scams as already cheap Asian product came into their country via Panama at much lower prices than a real market would bear.

Did Panama say that Colombia’s government is trying to protect its own apparel manufacturing sectors against foreign competition? Of course. It’s true.

The panel in Geneva did not reject the Colombian proofs, nor did it deny that money laundering is affecting Panamanian – Colombian trade. They just held that the duties in question were not necessary to stop these sorts of transactions. Might such a duty be necessary in another case? Maybe, but the panel just dealt with the dispute at hand. Wit this ruling on the heels of the Mossack Fonseca revelations and the Waked bust, Panama avoided a third high-profile money laundering stain in as many months.

The dispute may or may not end now, because Colombia may disregard the ruling, or it may come up with some new sorts of sanctions. Panama has this reputation in the world of trade and financial services, and Colombia is not the only South American country that has been complaining about it. The next retaliatory or discriminatory measures may or may not get thrown out by international tribunals.

Find links to the WTO panel’s decision, and an addendum to it, here.


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