Panama’s economy thrives on banking secrecy, and its “comparative advantage” rests on the ease with which U.S. companies can create subsidiaries there to evade paying their fair share of U.S. taxes. A Government Accountability Office study identified Panama as the only current or prospective FTA partner listed on all of the major tax-haven watch lists.
Panama is home to approximately 400,000 multinational subsidiaries, second in the world only to Hong Kong. Each one of those companies would be granted special rights under the FTA’s investment provisions to challenge Panamanian or American financial oversight regulations.
Panama has long been a key target of both the Organization for Economic Cooperation and Development (OECD) and the G7’s “Financial Action Task Force” for its resistance to international norms in combating tax evasion and money laundering. In fact, Panama is a main site of drug money laundering by Mexican and Colombian drug kingpins, according to the State Department. Concerns over these issues derailed White House attempts to secure passage of the FTA in 2009.
While the Panama FTA requires US federal and state procurement agencies to show no preference for US businesses, it simultaneously allows Panama to exclude US construction and other firms when contracting for the massive Panama Canal Improvement Project.
In addition, the same problematic, NAFTA-style trade provisions regarding food safety, intellectual property, environmental protection, and agriculture (among other issues) still remain.
Another NAFTA is the last thing either country needs.