Panama USA Free Trade Agreement

Introduction – Panama and the USA have been in negotiations regarding a Free Trade Agreement. Negotiations seem stuck and the agreement does not seem to be moving. We will discuss the basic points of this agreement and explain what small changes it will make in Panama.

Nothing in the free trade agreement has any impact on Panama Corporations, Foundations, Banking or Stock brokers. No privacy, secrecy or confidentiality laws are going to be changed. or are even on the table for changes.

What the Free Trade Agreement Will Affect – Panama in 2006 exported 337 million dollars worth of good to the USA and practically all of it went duty free. On the other side nearly 2.5 Billion dollars of goods was imported into Panama from the USA in 2006 and most of this got hit with a variety of import duties. For instance American made cars are hit with an import duty ranging from 3% to 20%. So it will allow American goods to be sold more competitively in Panama and probably hurt the sales of Panama made goods. While Panama does not make cars it would impact other products and probably hurt sales of Japanese and Korean cars. This does not seem to be a good thing for Panama.

The free trade agreement also calls for ecological measures and labor measures that will for sure increase the cost of doing business for those in Panama seeking to export into the USA thus making the USA made goods more competitive in the USA marketplace as well as in Panama. It could allow American firms to come here and process meat for instance but they can already do this in the USA or other closer countries so it does not seem to make much sense.

Professional Licensing – Panama has laws preventing those not Panama Citizens from holding certain professional licenses like: Doctor, Accountant, Optometrist, Chiropractor, Lawyer and Engineer. The free trade agreement would open up these restrictions but say an American lawyer would still need to go to a Panama law school and pass the test to be a lawyer, they could not just show up and say, "hey I am a lawyer let me practice". When it comes to say an engineer or Doctor the requirements may be not as stringent since the professions are closer to each other cross border. It remains to be seen what happens.

What it is doing is letting those that are not citizen’s practice in these professions if they are otherwise qualified. I think there are under 10 Chiropractors in all of Panama with over 3 million people right now. There does seem to be an adequate number of doctors or even more than adequate amount.

Financial Market – Generally the agreement would theoretically open up the way for a USA financial services company to offer services in Panama but it is not expected to be widely taken advantage of. US financial entities would be unlikely to gear up for a market of such limited size. Many medium sized American cities have far greater market potential.

Intellectual Property Rights – Panama would have to get serious about enforcing trademark violations. We may start to see the motion picture people sue poor Panamanians for downloading movies like we see in the USA. The people selling DVD’s and Louis Vuitton purses in the street would be gone. Internet Cafes would have to show the licenses for all the software they install on their computers. Possible some prescription drugs sold in the Panama drug stores would have to be discontinued because of possible patent infringement claims asserted by the American Pharmaceutical Companies and this would mean grater costs for prescription drugs imposed on people that have trouble paying for medicines at present.

Again Panama would be put in the role of policeman to protect the economic interests of the USA companies and this would run up a bill for the Panama government to engage in such enforcement and in turn the people of Panama would be picking up the tab for this activity.

Summary – We cannot see any big changes in anything from this treaty except one will be able to buy American goods at a lower price in Panama. For those who love American goods this can be a plus. This should also hurt the sales of locally produced goods that compete with the American goods. One way or the other this does not appear to be a good deal. The Panama Banks should not be affected. The laws for Panama Incorporation, foundations or stockbrokers are unaffected. So life goes on with or without the agreement.