Panama FTA

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US-Panama Free Trade Agreement (PFTA)

The PFTA was signed in December of 2006, though it remains to be ratified by the US Congress. The PFTA would make permanent the preferential trade status already in place between Panama and the US under the Caribbean Basin Initiative. In order to appease the demands of the US which were necessary for the implementation of such an agreement, Panama has had to agree to work towards numerous trade liberalization goals, including an expansion of its services sector, a repositioning of its manufacturing sector and removing protectionist policies covering its agricultural sector.

The United States Trade Representative states that 88% of US commercial and industrial exports would become duty-free immediately, with remaining tariffs being phased out within ten years of the treaty’s ratification. More so, nearly half of US farm exports to Panama would achieve duty free status immediately upon implementation, with market access being widened within subsequent years.

An ongoing concern with PFTA and other bilateral trade agreements like it is that they allow for discretion in dispute settlement panels in the interpretation and application of the terminology of the ILO Declaration of Fundamental Principles and Rights at Work; simply put, this means that the Declaration can be interpreted differently from the ILO’s interpretation. As such, countries have the capacity to manipulate labor standards to their own preference, and can override basic human rights if they feel it is a necessary step in attracting Foreign Direct Investment.

Simultaneously, there are concerns that by subjecting small businesses and small-scale farmers to heavily developed and subsidized US goods, Panamanian workers will be unable to compete, and will subsequently be forced to either significantly cut production costs (which, as stated earlier, is a near certain precursor to the degradation of workers’ rights) or sell their resources off to the multinational corporations with whom they are forced to compete.