Panama Free Trade Commission Reports, U.S.-Panama Trade Agreement Implementation Moving Smoothly

Implementation of the trade agreement between the United States and Panama is going smoothly, trade officials for both nations reported after a recent meeting to review Panama and the United States to review the trade and economic impacts of the agreement.

The meeting between Diana Salazar, vice minister of international trade negotiations of the Panama Ministry of Commerce and Industry, and John Melle, assistant U.S. trade representative for the Western Hemisphere, was the second of the commission responsible for overseeing implementation and further elaboration of the U.S.-Panama Trade Promotion Agreement. The U.S.-Panama Free Trade Commission gathering was held on November 22 in Washington, D.C.

Panama is an emerging Central American economy that is shaping to be a beneficial trading partner for California. The bilateral relationship between the United States and Panama has continued to strengthen during the four years the agreement has been in force and that implementation is proceeding well and smoothly, the commission reported.

“We underscored the importance of ensuring the effective implementation of the agreement in both our countries, and the key role the agreement plays in facilitating sustainable, broad-based economic growth and as an important catalyst in facilitating competiveness,” said Salazar and Melle in a statement. “We agreed to continue to work together to ensure effective implementation of, and compliance with, the trade in goods and services, customs, intellectual property rights, labor, and environment obligations of the agreement. We want to ensure that the agreement succeeds in fostering job creation and increasing the economic prosperity of all our citizens.”

U.S.-Panama Free Trade Agreement

The California Chamber of Commerce supported the U.S.-Panama Trade Promotion Agreement, which went into effect on October 31, 2012. The agreement significantly increases the ability of U.S. companies to export their products to one of Latin America’s fastest-growing economies, while dramatically reducing the tariff rates across the range of U.S. industrial and agricultural goods.

The United States and Panama signed the free trade agreement (FTA) in June 2007. The Panamanian government approved the FTA in 2007.

The U.S. House of Representatives passed the FTA with a vote of 300-129 and the U.S. Senate passed the measure with a vote of 77-22 on October 12, 2011.

Trade Overview

With a population of 3.9 million and a GDP of $46.2 billion, Panama has seen consistent yearly growth in the realm of 8–11% since 2006. Roughly 80% of Panama’s GDP is created within its services sector. Operation of the Panama Canal, the banking industry, container ports, and medical and health are the largest factors of this service economy, according to the U.S. Department of State.

In 2015, the United States exported $7.8 billion to Panama, including petroleum and coal, nonelectrical machinery, computers, and chemicals. Panama is currently the U.S.’s 33rd largest export partner. The United States imports $408.1 million from Panama, including fish, food, and primary metal. U.S. Department of State

As California’s 40th largest export partner, Panama imported $380.9 million worth of goods in 2015. According to the U.S. Department of Commerce, the top categories included petroleum and coal products (31%), transportation equipment (12.6%), computer and electronic products (11.7%), and apparel (9.2%). California imports approximately $44.4 million from Panama, including fish and agricultural products.

Implementing Agreement’s Institutional Framework

Recognizing the critical importance of trade in agricultural products and the jobs and workers that are sustained by agriculture in both countries, the commission noted the work of the Committee on Agricultural Trade and the Committee on Sanitary and Phytosanitary Matters. Both committees met in Panama City on December 8, 2014, to discuss issues of mutual concern. The week of November 22, the U.S.-Panama Free Trade Commission reviewed a number of agricultural-related measures and instructed these committees, particularly the Committee on Sanitary and Phytosanitary Matters, to meet again as early as possible in 2017 to discuss these issues in more detail at the technical level. These committees constitute an important tool to ensure that stakeholders in both countries benefit from the opportunities created by the agreement in the agriculture sector.

The U.S. Panama Free Trade Commission also received the report and commended the work of the Environmental Affairs Council, and the Environmental Cooperation Commission. The Commission recognized the importance of transparency and maintaining communication with all stakeholders regarding labor and environmental issues, and will continue to use these mechanisms for receiving meaningful public comment as part of the commitment to engage with stakeholders in these areas.  The Commission commended the Environmental Affairs Council for formalizing agreement with the Water Center for the Humid Tropics of Latin America and the Caribbean (CATHALAC), located in Panama City, Panama, in June 2015, that CATHALAC would house the Environment Secretariat, as well as the December 21, 2015, agreement establishing the Environmental Secretariat, pursuant to Article 17.8 of the TPA. The secretariat is intended to promote public participation in identifying and resolving environmental enforcement issues, and considers submissions from the public on enforcement of environmental laws. The free trade commission instructed the Environmental Affairs Council to continue its work to hire the executive director for the Environmental Secretariat.

Recognizing the importance of an effective dispute settlement procedure that ensures the rights and benefits of both countries under the agreement, the free trade commission adopted at its May 2014  meeting model rules of procedures for settling disputes and a code of conduct for panelists, and agreed on the remuneration of panelists, assistants, experts, and the payment of their expenses. The commission instructed its technical teams to conclude the outstanding work to establish the four rosters.

Recognizing the importance of updating the agreement’s rules of origin to correspond to the 2007 and 2012 changes in the Harmonized System (HS) in easing customs administration for customs authorities, producers, and exporters, the commission decided to update Annex 4.1 which takes these changes into account.  The commission instructed its technical teams to begin work on updating the agreement’s rules of origin to correspond to the 2017 changes to the HS nomenclature.

Bilateral Issues, Building Trade Capacity, Information Sharing

The commission also discussed bilateral issues of concern as well as possible initiatives to facilitate the widespread dispersion of benefits from the agreement. The commission instructed its technical staff to explore activities and programs that could be implemented to achieve this goal.

Commission members gave updates on other bilateral and regional trade agreement negotiations in which members are participating and discussed trade capacity building assistance based on Article 19.4 of the trade promotion agreement as a catalyst to foster trade, economic growth, poverty reduction and adjustment to liberalized trade.

More Information

For further information, see the latest CalChamber portal, www.calchamber.com/Panama.

Staff Contact: Susanne T. Stirling