Panama: A Win-Win Trade Agreement

In December 2006, the U.S. and Panamanian governments announced they had completed negotiations on a Trade Promotion Agreement “with the understanding that it is subject to further discussions regarding labor,” according to the Office of the U.S. Trade Representative.  It’s a win-win accord that offers tangible benefits to both countries — no ifs, ands, or buts:

Geostrategic Partnership

The agreement will strengthen the century-old U.S.-Panama geostrategic partnership.  From the time of the canal’s construction, the United States and Panama have made common cause on issues from security to commerce.  Panama has major ports on both the Atlantic and the Pacific, and fully five percent of world trade passes through the canal.  With a remarkable one-third of its population speaking English fluently and a fully dollarized economy, Panama is a good friend and partner of the United States.  The trade agreement will help Americans and Panamanians get even more benefits from these longstanding ties.

A Level Playing Field

The agreement will level the playing field for American workers, farmers, and companies by eliminating over 88% of Panama’s tariffs on U.S. consumer and industrial goods and a majority of the most competitive U.S. farm exports immediately upon implementation.  The World Bank reports that Panama has a weighted average tariff of 7%, whereas the United States eliminated nearly all its tariffs on imports from Panama through the Caribbean Basin Initiative (1984) and the U.S.-Caribbean Basin Trade Partnership Act (2000).  The agreement will make these trade openings reciprocal — a two-way street that will benefit both countries.

Business Opportunities

Today, U.S. companies bidding on Panamanian government contracts are at a disadvantage because Panama is not a party to the World Trade Organization’s Government Procurement Agreement.  If approved, the agreement will put U.S. firms on a level playing field with Panamanian companies to compete for these opportunities — a potentially lucrative benefit as the country moves forward with the $5.25 billion expansion of the Panama Canal.

Complementary Economies

With its economy overwhelmingly based on services, Panama’s economy complements the strengths of the U.S. economy.  Panama has no significant textile or apparel industry, and its farmers’ export crops (mostly tropical products) largely do no compete with U.S. farm and ranch products.  Environmental stewardship has long been a priority for Panamanians as the canal is dependent on protection of the forests in the huge watershed that allows this engineering marvel to function.