Fate of trade pact in Panama’s hands

A free trade agreement with Panama won’t happen until the nation’s leaders raise tax and labor standards, Democrats and watchdogs say.

The tough talk comes even as President Barack Obama reiterated his support this week for the trade agreement.

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The Central American nation is a noted tax haven and it has failed to follow through on its promise to clean up its tax act. In 2002, Panama said it would abide by tax rules championed by the international watchdog Organisation for Economic Co-Operation and Development (OECD), but has yet to make good on that promise.

“They’re one of the only countries on the OECD watch list that has not implemented one of the eleven international standards,” said Lori Wallach, Director of Public Citizen's Global Trade Watch division, a group opposed the Panama free trade agreement as it is currently written.
 
Fixing its lackluster tax code must happen before the U.S. would even consider enacting the pact, according to several sources.

“Until Panama has agreed to be part of a tax agreement and until it changes its laws to implement that tax agreement, it is 100 percent wrong to have a Panama FTA,” Rep. Lloyd Doggett (D-Texas), a senior member on the tax-writing Ways and Means committee, told The Hill.

In remarks before the Export-Import Bank’s Annual Conference, Obama urged completion of pending free trade agreement with Colombia, South Korea and Panama.  With human rights violations still a huge concern with Colombia and economic issues plaguing the South Korea deal, the Panamanian pact seemed the most likely to succeed and become law.  

 But even groups that advocate for passage of the pact say Panama has resisted Treasury’s demand to abide by international tax rules, which require greater disclosure on owners of Panamanian bank accounts.

Panama must also align its labor laws with International Labor Organization standards for allowing companies with fewer than 40 employees to unionize. In addition, it must permit collective bargaining and the right to strike in start-up companies less than two years old. It is unclear if these issues have been resolved and both require Panama to act, not the U.S.

“The administration has been real clear, up front, before we – the administration – are going to start wrangling with Congress about what needs to be done with the agreement, you guys [Panama] need to clean up these outstanding issues,” Wallach said, adding, “At this point, it is largely out of the administration’s hands.”

Pro-trade Republicans see it differently.

Senate Finance Committee ranking Republican Chuck Grassley (Iowa) argued enactment of the free trade agreements would help to reverse the current economic downturn and called on Obama to back his words up with action.

“The White House says it’ll bring those agreements forward ‘at an appropriate time,’” Grassley said in prepared remarks. “It would be hard to think of a more appropriate time than right now.”

 A senior Republican on the Ways and Means Committee trade subcommittee noted Obama’s speech promoted job creation and the pending free trade agreements. He argued that one would benefit from the other.
 
“The president has admitted these agreements could create over 250,000 American jobs, yet Democrats in Congress refuse to work on, let alone pass a new trade agreement,” said Rep. Kevin Brady (R-Texas) in prepared remarks.