A trade deal between the U.S. and Panama that was negotiated five years ago went into force on Wednesday. The agreement, which will allow increased U.S. exports into the country, was signed by former president George W. Bush in June 2007 and ratified by Panama’s parliament the same year. However, the U.S. Congress held up the agreement with concerns over Panamanian labor protections and tax haven laws. It was finally ratified on October 12, 2011 and signed into law by President Obama on October 21, 2011.
The trade promotion agreement, known in Spanish as El Tratado de Promoción Comercial (the Treaty of Commercial Promotion) will eliminate Panama’s tariffs on 86 percent of U.S. goods such as cars, medical and information technology, chemicals, and electrical equipment. It also eliminates Panama’s tariffs on 50 percent of U.S. agricultural exports. Other tariffs will be phased out over time. The agreement will open the U.S. market to 100 percent of Panama’s industrial and fisheries products, as well as textiles and artisanal items.
Ricardo Quijano, Panama’s minister of commerce and industry, said that the trade agreement would benefit Panamanian consumers, who he said will pay less for products that enter the country without taxes. He argued that the agreement will give Panama the tools it needs to compete in a free market economy while the country is in the midst of a $5.3 billion canal expansion project.
However, members of Panama’s agricultural sector are worried that they are not prepared to deal with a flood of low-priced products from the United States. The Asociación Nacional de Benefactores y Exportadores de Café (National Association of Coffee Benefactors and Exporters) said they were worried about the reduction of tariffs on instant coffee.
“The direct consequence of this measure is the accelerated loss of the national market stocked by national producers, benefitting transnationals with a lot of economic power,” said the coffee producers in a public announcement.
The U.S. is Panama’s principal trade partner, with $163 million of Panama’s $785 million in exports destined for the U.S.