Panama Trade Promotion Agreement: Leveling the Playing Field

April 29, 2011
Cargo Ship Sails Through Panama Canal

On Thursday, April 28, Panamanian President Martinelli visited the White House and met with President Obama to discuss next steps with regard to the U.S.-Panama Trade Promotion Agreement. This visit and the Trade Promotion Agreement build on a tradition dating back to 1906, when President Teddy Roosevelt traveled to Panama -- becoming the first U.S. president to leave the country while in office.

President Roosevelt was traveling to inspect the progress of U.S. construction of "the path between the seas" that would become the Panama Canal. The United States operated the Panama Canal for over 90 years, establishing close and enduring people-to-people contacts. In 1999, Panama became the owner and operator of the Canal, but our strong ties and shared history continue to bind us -- the United States remains the Canal's largest beneficiary. Approximately two-thirds of the ships passing through the Panama Canal are heading either to or from U.S. ports. Many U.S. ports are expecting to benefit from significant increases in freight shipments and the resulting jobs once the Canal expansion now underway is complete.

The United States has long been Panama's preferred commercial partner, with almost 30 percent of Panama's imports coming from the United States. In 2010, the United States enjoyed a $5.7 billion goods trade surplus with Panama. This trade surplus is particular impressive, considering Panama currently charges higher tariffs on American-made products than we do on Panamanian goods. The U.S. market is already largely open to imports from Panama, with 98 percent of Panamanian goods entering duty-free. However, U.S. industrial goods currently face an average tariff of 7 percent in Panama, with some tariffs as high as 81 percent. U.S. agricultural goods face an average tariff of 15 percent. Tariffs on U.S. chicken legs are as high as 260 percent!

After the Trade Promotion Agreement enters into force, the majority of U.S. exports of consumer and industrial goods to Panama would become duty-free immediately, allowing our exports to continue to grow. U.S. agricultural exports will benefit from the Agreement as well, with over half receiving immediate duty-free treatment and most tariffs eliminated within 15 years. This Agreement would level the playing field for U.S. farmers, manufacturers, and small businesses interested in exporting goods and services to Panama.

The benefits of the Trade Promotion Agreement are clear, and the rest of the world isn't waiting for us. Already, the United States faces stiff competition as Panama's other trading partners increase their share of Panama's total imports. In 2010, Panama finalized a trade agreement with Canada. Canada is of course an important trading partner in its own right; we also know that many Canadian goods and services directly compete with U.S. products. Similarly, the European Union negotiated an agreement which will provide advantages to European exports of machinery and transportation equipment. We need to ensure that our firms can compete on a level playing field to maintain their market share.

The U.S.-Panama Trade Promotion Agreement will underscore our strong partnership with Panama and begin another chapter in our shared history. In that spirit, as President Obama said yesterday in the Oval Office, we thank again President Martinelli for his leadership on this issue. We look forward to working on realizing it together for the benefit of both our countries.

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