US THINK TANK

FTA deal would hit Panama farmers

05-29-2009 | STAFF

fasvatstar@laestrella.com.pa

A recent paper by a Washington DC think tank surveys how the pact will hurt local farmers and benefit the US agro-industry

Panama Star PANAMA. A Free Trade Agreement (FTA) as it now stands between Panama and the US would erode protections Panama has set up for its most vulnerable economic sectors, including agriculture, says a report from a Washington DC think tank.

A week after a Senate Finance Committee hearing on the US-Panama Free Trade Agreement opened a Pandora’s box of road blocks to a Congress ratification, the Council on Hemispheric Affairs (COHA) has released an analysis assessing the benefits of a potential deal both to the United States and to Panama.

US objections range from concerns on Panama’s labor standards to allegations the country serves as a tax haven.

COHA’s analysis includes a rundown on Panama’s economy, pointing out that the country has repeatedly adjusted its laws and regulations to maintain a competitive business climate, a reality many critics maintain opened the door to foreign companies interested in dodging fair taxes, exploiting malleable labor regulations, and taking advantage of shrouded financial transparency.

Yet there has been much media circulation of like-minded denunciations and subsequent rebuttals by local members of the government and financial sectors.

Two points seldom covered and which the analysis sheds light on are the agreement’s clauses on labor (added to squelch Democrats’ cries) and the repercussions to Panama’s agricultural sector were the deal to pass.

COHA Research Fellow Mary Tharin argues in her paper that although the agreement makes reference to the UN International Labor Organization’s Fundamental Principles and Rights at Work Declaration, it contains no provisions that would force the signatories to strictly implement the UN’s labor standards, jeopardizing workers’ rights in either country.

Further, she states, “the agreement does not prevent Panama from weakening or reducing the protections afforded in domestic labor laws in any future effort it may make to encourage trade or investment.”

The trade deal requires the Panamanian government to adhere to its own labor laws, and sets up a dispute settlement system to uphold these standards.

Yet COHA deems this measure “little more than window-dressing,” arguing that the maximum government fine of $15 million only amounts to about one-tenth of one percent of total US – Panama trade in 2006.

In addition, the paper argues that the funds would be paid to a “joint commission to improve labor rights enforcement,” which COHA claims could be easily funneled back into Panamanian government’s coffers.

The report states that a trade deal as it currently stands would erode protections Panama has set up for its most vulnerable economic sectors, including agriculture.

Most Panamanian products already enter the US tax free, so a trade deal would mostly reduce tariffs on products imported from the United States, including those coming from its heavily subsidized agricultural sector.

Panama’s negotiators were well aware of the dangers associated in opening our small Central American country up to the Northern behemoth, and thus reserved some protections for the agriculture sector, which supports 40 percent of the country’s rural population.

Yet COHA argues Panamanian officials failed to reach effective compromises to protect the sector from US incursion.

The paper reads: “The FTA immediately eliminates tariffs on over 60 percent of US agricultural exports to Panama, with most remaining tariffs to be gradually eliminated over a period of 15 years or less.”

The deal states that two key Panamanian products, rice and sugar, will retain limited protections in the short-term, allocating time for Panama to develop its non-traditional export crops, such as melons, palm oil, and pineapples, which some view as the future of our agricultural sector.

Yet the same strategy has already been sold to Central America, with Panama’s neighboring countries currently exporting these good to the US at low prices.

According to COHA, under this new regime, Panamanian farmers would be “forced to join the regional ‘race to the bottom’ in order to ensure competitive prices for its products on the global market,” to the detriment of the country’s rural economies.

Given the lenient labor measures imposed by the current deal and the fact that the US is to benefit the most in decreased tariffs, COHA concludes that the US-Panama Free Trade Agreement will “inevitably be a bonanza for big business,” eliminating inconvenient hurdles that cut down on corporate profits, including that of the US agro-industry, and leaving behind workers in both countries and Panamanian farmers, to lose out.

Both President Martin Torrijos and president elect Ricardo Martinelli strongly support the agreement.

Torrijos’ government is pressing hard for an agreement ratification before those who oppose the trade pact are able to block its passage on the Hill, and before he leaves office on July 1.