Murphy: U.S. Risks Being Left Behind as Panama Trade Deal Languishes

Posted June 24, 2010 at 10:05am

Three years ago next week, the United States and Panama signed a bilateral trade agreement that promises jobs and opportunities for American workers and farmers. Unfortunately, the accord has been gathering dust ever since, and those jobs and opportunities may be slipping away.

[IMGCAP(1)]When President Barack Obama delivered his State of the Union address in January, he recognized the link between trade and jobs. The U.S. Chamber of Commerce and others welcomed his call for a national goal to double U.S. exports within five years as a way to create millions of jobs.

This goal is based on the recognition that our economic recovery will founder if it depends on U.S. consumers alone. But it doesn’t have to: Outside of our borders are markets that represent 73 percent of the world’s purchasing power, 87 percent of its economic growth and 95 percent of its consumers.

Enter the U.S.-Panama Trade Promotion Agreement. It will level the playing field for American workers, farmers and companies by eliminating almost all of Panama’s tariffs on American goods.

The tariffs that Panama levies on U.S. goods often soar into the double digits, while nearly all U.S. tariffs on imports from Panama were eliminated years ago. The agreement will turn the U.S.-Panama trade relationship into a two-way street that benefits both countries.

However, three years of inaction has a price. With this bilateral accord shelved by Washington, Panama has not stood still. On May 14, Panama signed a similar trade agreement with Canada, and on May 19, it signed one with the European Union. These could enter into force within the next 12 months.

If Washington delays further, U.S. exporters will be put at a clear competitive disadvantage in the Panamanian market. Canadian wheat farmers will be able to undercut the prices offered by their U.S. competitors, and European manufacturers will easily undercut U.S. companies selling their goods in Panama.

The cost of these delays will be high. In September 2009, the U.S. Chamber of Commerce released a study that found the United States could suffer a net loss of more than 380,000 jobs and $40 billion in export sales if it fails to implement pending trade agreements while the EU and Canada move ahead with their own agreements.

Significant business opportunities are on the line. The Panama Canal Authority is undertaking an expansion of the canal at a cost of more than $5.25 billion. This is one of the largest public works projects in the world since the construction of China’s Three Gorges Dam.

If approved, the trade agreement will grant U.S. companies duty-free access to the Panamanian market and the chance to compete in selling everything from heavy equipment to engineering services in a market that has reached annual growth rates near 10 percent in recent years.

But there’s even more at stake. U.S. inaction shows a casual disregard for a century-old partnership. From the time of the canal’s construction, the United States and Panama have embraced common values and interests in the region.

The government of President Ricardo Martinelli has proved to be a firm ally of the United States and shares a commitment to democracy and free enterprise. Closer trade ties will enhance this partnership; inaction on the agreement sends a signal that Washington just doesn’t care.

The Obama administration has already found that there is no trading partner perfect enough to satisfy every trade critic. However, Panama has already ratified all eight International Labor Organization conventions on core labor standards, and Panama’s National Council of Organized Workers, the umbrella group for all of Panama’s trade unions, endorsed the agreement in June 2007.

Environmental stewardship has long been a priority for Panamanians. This is simple self-interest: The canal, which plays a critical role in the economy, runs on captured rainwater, and Panamanians know the rains depend on protection of forests in the huge watershed at the heart of the country.

Critics have tried to tar Panama as a tax haven. But Panama has agreed to implement the internationally agreed tax standard on exchange of information negotiated at the Organization for Economic Cooperation and Development. Panama’s government is working closely with Washington to address any outstanding concerns.

It’s hard to see the downside to trade with Panama. With its economy overwhelmingly based on services, Panama presents little or no challenge for sensitive sectors in the U.S. economy. Its farmers’ export crops (mostly tropical products) are largely complementary to U.S. agriculture.

Amid a sharp recession, what possible benefit can there be in opposing this trade accord — or the agreements with Colombia and Korea? To delay their approval only means that American workers and farmers will continue to face steep tariffs in these growing markets — taxes, in fact, paid into foreign treasuries.

Trade is the best way to boost the U.S. economy and create the jobs that Americans need so badly need right now. We’ve stood on the sidelines for too long. It’s time to get back in the game.

John Murphy is vice president for international affairs at the U.S. Chamber of Commerce.