Panama And The US Begin FTA Negotiations

by Mike Godfrey, for LawAndTax-News.com, New York

04 May 2004

Talks began in Panama City last week on the proposed Free Trade Agreement between Panama and the US. President Bush informed Panamanian President Mireya Moscoso in a meeting last July that he wished to move negotiations forward, and assigned top US trade representative Rober Zoellick to the case, saying that he wishes to "accommodate" Panama in any future deal.

The US has recently concluded free trade agreements with the other Central American countries in CAFTA and the Dominican Republic. Panama itself has such agreements with El Salvador and Taiwan, and hopes to be nominated as host for the permanent headquarters of the Free Trade Agreement for the Americas (FTAA).

FTAs usually set out to harmonize regimes for intellectual property, government procurement, financial transparency, labor laws, environmental legislation and other areas that interest investors.

In the case of Panama, the FTA is seen as crucial in attracting US investors and contractors to the mooted Panama Canal enlargement project. At its most basic, the enlargement will increase capacity at a cost of about US$1bn, but the government wants to go much further and increase the width of the whole canal in order to accommodate 'post-Panamax' ships, now beginning to take over as the preferred size for major shipping companies. This will secure the future of the canal (wholly owned by the government, although nominally independent) but at a cost of US$8bn, dwarfing Panama's own capital budget.

US foreign direct investment in Panama currently totals roughly $25 billion, in sectors including finance, maritime and energy. The trade deficit with the US, running at more than US$1bn annually, is outweighed by capital receipts, and the IMF recently issued a generally favourable report on the economy, incidentally praising the government's FTA policy.

Talks will now resume in Los Angeles in June 7.

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