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Labor provisions require additional discussions, USTR Schwab says

WASHINGTON, DC – 12/26/06 – The US has reached a free-trade agreement with Panama that promises to boost trade and investment flows between the two nations and expand the reach of US bilateral FTAs in Latin America.

The pact, though is subject to “additional discussions” on labor, according to US Trade Representative Susan Schwab.
Labor and environmental issues related to FTAs have proved to be controversial in the US Congress, which now must approve the agreement.

Democrats, who now control both the Senate and House of Representatives, generally have supported stronger labor and environmental provisions than those negotiated by the Bush Administration.

In addition to the agreement with Panama, the new Congress will need to address similar deals with Colombia and Peru when it convenes in January. 

“We strongly support the agreement and urge both legislatures to give it a resounding yes,” said Eric Farnsworth, vice president of the Council of the Americas.

The council is a business group promoting democracy, open markets, and the rule of law throughout the Americas.

In the near term, passage of the accord is not likely to affect trade flows from Panama significantly because 95% of Panamanian exports already enjoy duty-free access to the US market.

The FTA, however, would “expand and secure” for the long term those benefits, which now require periodic congressional approval, according to a news release issued by the Office of the USTR.

In addition, Panama would be able to export duty-free to the US market nearly all of its sugar production compared with three-quarters of its output now, according the American Sugar Alliance.

The sugar provision is considered by trade experts a win for Panama because the US limits sugar imports to keep domestic prices higher than those set in world markets.

US-based sugar producers, who in 2005 lobbied against the US-Central American Free Trade Agreement (CAFTA) because the countries involved also are sugar-producers, have said they are not opposed to the FTA with Panama, according to the alliance.

In addition, according to a US trade official, the new FTA would guarantee that Panama’s construction firms receive 10% of the contracts to modernize and expand the Panama Canal, which until 1999 was US territory.

Under the new free trade deal, US companies also would have an opportunity to participate in the massive project, which the US Chamber of Commerce (USCOC) has called “one of the most important infrastructure projects in the hemisphere.''

In October, the Panamanians approved in a referendum the $5.3 billion canal expansion plan, which would double its capacity and enable larger ships to cross between the Atlantic and Pacific oceans.

The agreement also would put US-Panamanian trade “on a reciprocal, mutually beneficial footing”, said Dan Christman, vice president of the USCOC, the country’s largest business lobbying group in a recent news release.

More than 88% of US exports of consumer and industrial goods to Panama would become duty-free immediately, with remaining tariffs phased out over 10 years. Panama also would expand market access substantially across the entire range of services, including financial services.

More than half of all US farm exports to Panama would become duty-free once the FTA enters into force and tariffs on remaining agricultural products would be phased out within 15 years, according to a prepared statement by US Agricultural Secretary Mike Johanns.

California-based agricultural producers, though, are expected to reap marginal benefits from the new agreement.
 
According to the Sacramento Bee, the presumed winners will include California's wine, nut and tree fruit producers, who would immediately gain tariff-free access to Panama's 3.1 million consumers.

But with Panama now buying only $200 million worth of US agricultural products annually, and the country's entire population barely equivalent to the combined total of Sacramento, Fresno, San Joaquin, and Stanislaus counties, the real-world return will likely be “humble,” the paper said.

"In the end we benefit," said Rep.Devin Nunes, R-Tulare, told the paper, "but it's small potatoes."

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