On Oct. 31 the Panama-United States Free Trade Agreement’s finally entered force, five years after it had been signed by both nations.
The agreement, first negotiated by President George W. Bush, was signed into law by President Obama. The agreement was confirmed in 2006, signed by both nations in June 2007, and approved by Panama’s National Assembly the next month. Then the agreement sat on the shelf for four years, blocked first by the Democratic majority in Congress and then by the Obama Administration. There had been concerns from Democrats over concerns Panama’s labor protections and tax haven laws. It was negotiated along with the free-trade agreements with Colombia and South Korea, which took effect earlier this year.
In a statement Secretary of State Hilary Clinton called the deal a “historic milestone.” “It’s an example of the Obama Administration’s commitment to economic statecraft and deepening our economic engagement throughout the world,” Clinton said.
The deal adds to the multiple free trade agreements the U.S. has with in the Western Hemisphere. Deals already exist with Canada, Peru, Mexico, the Dominican Republic, Colombia, and five Central American countries.
The deal should lead to a flood of U.S. exports to Panama. The United States’ exports to Mexico and Colombia increased by five fold and three fold after their trade agreements took effect.
Panama and the United States already have close ties forged from a long and often rocky history. About 10 percent of U.S. imports and exports of goods pass through the Panama Canal, and that percentage could rise as Panama completes its $5.3 billion canal expansion project.
The free trade deal instantly removes Panama’s tariffs on 86% of U.S. consumer and industrial goods, including chemicals, autos, information technology, electrical equipment, and medical technology. It also will immediately eradicate Panama’s tariffs on roughly 50% of U.S. agriculture exports and promises U.S. companies access to Panama’s highly services-dominated economy, especially in the areas of telecommunications, financial services, energy, and professional services.