FACT SHEETS - U.S.-PANAMA TRADE PROMOTION AGREEMENT

8/7/2019 FACT SHEETS - U.S.-PANAMA TRADE PROMOTION AGREEMENT

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THE WHITE HOUSEOffice of the Press Secretary

FOR IMMEDIATE RELEASEApril 18, 2011

FACT SHEETS: U.S.-PANAMA TRADE PROMOTION AGREEMENT

President Obama is committed to pursuing an ambitious trade agenda that will helpgrow our economy and support good jobs for U.S. workers by opening new markets.To achieve that objective, we seek to provide a level playing field that creates economicopportunities for U.S. workers, companies, farmers, and ranchers, and that ensures ourtrading partners have acceptable working conditions and respect fundamental laborrights. As part of this broader trade agenda, the Obama Administration has workedclosely with the government of Panama to resolve outstanding issues related to the

U.S.-Panama Trade Promotion Agreement.

Yesterday, a Tax Information Exchange Agreement (TIEA) went into effect between theUnited States and Panama. The TIEA will permit the two countries to improve their taxinformation exchange transparency networks globally. The Government of Panama hasalso taken a series of legislative and administrative actions to further strengthen itslabor laws and enforcement. The completion of action on transparency and labor clearsthe way for the Obama Administration to begin discussions with Members of Congressabout the draft implementing bill for the Agreement.

Panama is one of the fastest growing economies in Latin America, expanding 6.2percent in 2010, with similar annual growth forecast through 2015. The U.S.-PanamaTrade Promotion Agreement will support American jobs, expand markets, andenhance U.S. competitiveness by eliminating tariffs and other barriers to U.S. exportsand expanding trade between our two countries.


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BENEFITS OF THE U.S.-PANAMA TRADE PROMOTION AGREEMENT

The U.S. Panama Trade Promotion Agreement (the Agreement) will support American jobs, expand

markets and enhance U.S. competitiveness.

Panama is one of the fastest growing economies in Latin America, expanding 6.2 percent in 2010, withsimilar annual growth forecast through 2015. This comprehensive Agreement will eliminate tariffs and

other barriers to U.S. exports, promote economic growth, and expand trade between our two countries.

U.S. industrial goods currently face an average tariff of 7 percent in Panama, with some tariffs as high as 81percent. U.S. agricultural goods face an average tariff of 15 percent, with some tariffs as high as 260percent.

The Agreement guarantees access to Panamas $20.6 billion services market, including in priority areassuch as financial, telecommunications, computer, distribution, express delivery, energy, environmental, andprofessional services.

Panamas strategic location as a major shipping route also enhances the importance of the Agreement.Approximately two-thirds of the Panama Canals annual transits are bound to or from U.S. ports.

The Agreement will remove barriers to U.S. goods entering Panamas market.

Over 87 percent of U.S. exports of consumer and industrial products to Panama will become duty-freeimmediately, with remaining tariffs phased out over ten years. U.S. products that will gain immediate duty-free access include information technology equipment, agricultural and construction equipment, aircraft andparts, medical and scientific equipment, environmental products, pharmaceuticals, fertilizers, and agro-chemicals.

U.S. agricultural exports will also benefit. Nearly 56 percent of current trade will receive immediate duty-free treatment, with most of the remaining tariffs to be eliminated within 15 years. Panama willimmediately eliminate duties on high-quality beef, frozen turkeys, sorghum, soybeans, soybean meal, crudesoybean and corn oil, almost all fruit and fruit products, wheat, peanuts, whey, cotton, and many processedproducts. The Agreement also provides duty-free access for specified volumes of standard grade beef cuts,chicken leg quarters, pork, corn, rice, and dairy products through tariff rate quotas.

The Agreement is key to maintaining U.S. market share in this important market.

The United States faces strong competition as Panamas other trading partners increase their share ofPanamas total imports.

In 2010, Panama finalized a trade agreement with Canada. Many Canadian goods and services directlycompete with those of the United States in Panama. U.S. products, such as pork and frozen french fries, wilbe at a significant competitive disadvantage if they continue to face duties while Canadian products enjoypreferential access.


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The European Union (EU) has negotiated an Association Agreement with the Central American countries,including Panama, which was initialed on March 22, 2011. Machinery and transportation equipment,chemicals and metals are the leading exports from the EU to Panama.

The Agreement provides significant infrastructure opportunities.

In addition to the ongoing $5.25 billion Panama Canal expansion project, the Government of Panama hasidentified almost $10 billion in other significant infrastructure projects.

Construction equipment and infrastructure machinery used in such projects accounted for $280 million inU.S. exports to Panama in 2010. Tariffs for this sector average 5 percent with almost all being eliminatedupon entry into force.

Other benefits of the Agreement Include:

A Level Playing Field for U.S. Investors: The Agreement ensures that U.S. companies in Panama areprotected against discriminatory or unlawful treatment, and provides a neutral and transparent mechanism forsettlement of investment disputes.

Greater Protection for Intellectual Property Rights: The Agreement provides for improved standards for theprotection and enforcement of a broad range of intellectual property rights, which are consistent with both U.S.standards of protection and enforcement, and with the standards increasingly embraced by our trading partners.Such improvements include state-of-the-art protections for digital products such as software, music, text, andvideos and stronger protections for patents, trademarks and test data, including an electronic system for theregistration and maintenance of trademarks.

Commitments to Protect Labor Rights and the Environment: The Agreement commits both Parties to adoptand maintain in their laws and practice the five fundamental labor rights as stated in the 1998 ILO Declarationon Fundamental Principles and Rights at Work. Both Parties are also required to effectively enforce and may

not waive labor laws related to fundamental labor rights. Both Parties also commit to effectively enforce theirown domestic environmental laws and adopt, maintain, and implement laws, regulations, and all other measuresto fulfill their obligations under covered multilateral environmental agreements. All obligations in the laborchapter and the environment chapter are subject to the same dispute settlement procedures and enforcementmechanisms as the Agreements commercial obligations.

Fair and Open Government Procurement: Under the Agreement, U.S. suppliers are granted rights to non-discriminatory treatment in bidding on procurement by a broad range of Panamanian government ministries,agencies, regional governments, and public enterprises. For procurement covered by the Agreement, it requiresthe use of fair and transparent procurement procedures, such as advance notice of purchases and timely andeffective bid review procedures.

An Open and Competitive Telecommunications Market: Panama has agreed to a pro-competitive regulatoryframework that builds upon the WTO Basic Telecommunications Reference Paper and guarantees competitiveaccess to Panamanian telecom networks on reasonable and non-discriminatory terms. U.S. telecommunicationscompanies are ensured the right to interconnect with Panamanian dominant carriers fixed networks at non-discriminatory and cost-based rates.


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LABOR PROTECTIONS AND

THE U.S.-PANAMA TRADE PROMOTION AGREEMENT

The Obama Administrations trade agenda is a catalyst for economic growth that will

support more and better jobs for American workers. As the President has stated, our

trade agreements must be consistent with our core values and interests, including

effectively protecting workers rights.

The U.S.-Panama Trade Promotion Agreement (the Agreement) includes strong

protections for workers rights, based on the May 10, 2007 bipartisan Congressional-

Executive agreement to incorporate high labor standards into Americas trade agreements. In

addition, President Obama made clear that several important labor concerns had to be

addressed before sending the Agreement to Congress. Although Panama has labor laws that

protect fundamental labor rights, the Administration had concerns with respect to provisions

which limited or otherwise provided exceptions to Panamas labor code to workers in certain

sectors or regions.

Beginning in 2009, Panama took a series of legislative and administrative actions to further

strengthen its labor laws and their enforcement in the areas of subcontracting, temporaryworkers, employer interference with unions, bargaining with non-union workers, strikes in

essential services, and labor rights in the maritime sector.

Panama implemented Executive Decrees to improve inspections and labor lawenforcement concerning:

- Subcontracting

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: Panama clarified the criteria for legitimate subcontracting and

ensured that labor inspections take place so that contracting arrangements do not

undermine worker rights.

Temporary Work Contracts

-: Panama established an enforcement plan to protect the

rights of temporary workers.Employer Interference in Unions

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: Panama established a plan to increase monitoring

and enforcement of labor laws that protect against employer interference with union

rights.

Direct Negotiations

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: Panama clarified that an employer may not enter into collective

negotiations with non-unionized workers when a union exists and that a pre-existing

agreement with non-unionized workers cannot be used to refuse to negotiate with

unionized workers.

Sector Specific Labor Rights

: Panama clarified strike restrictions for workers

involved in the cargo transportation sector.

Panamas Ministry of Labor also issued a Ministerial Resolution to address concerns inthe Maritime Sector by clarifying and reaffirming the application of the Labor Code for

maritime workers, including provisions on union organizing, collective bargaining, and

strikes. The resolution also increases inspections and labor law enforcement activities in

the maritime sector.

More recently, the U.S. and Panamanian governments agreed to a series of actions to

address the remaining concerns.


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Panama reformed its labor laws concerning:- Export Processing Zones

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: Panama protected the right to strike, eliminated restrictions

on collective bargaining, and eliminated an exemption that allowed companies to use

temporary workers for three years.

Bar Special Economic Zone

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: Panama eliminated restrictions on collective

bargaining for companies less than six years old, and eliminated an exemption that

allowed companies to use temporary workers for three years.

Companies Less than Two-Years Old

: Panama eliminated restrictions on collective

bargaining.

The Administration will continue to work with Panama to ensure that all of these

important initiatives are effectively implemented. The labor obligations under theAgreement will be subject to the same level of dispute settlement accountability as

commercial obligations; available remedies for violations of labor obligations will include

trade sanctions and fines.

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TAX TRANSPARENCY IN PANAMA

Panama has acted to improve its tax transparency practices and to address impediments in

its domestic law to robust tax information exchange.

The Government of Panama has made clear its policy is to improve its tax transparencyregime both with the United States and globally and has taken a number of actions to

implement such a policy:

Panama signed a Tax Information Exchange Agreement with the U.S. TreasuryDepartment on November 30, 2010.

In order to facilitate tax information exchange, Panama also amended its domesticlaw:

o Law 33, which was published in Panamas Official Gazette on June 30,2010, empowers the government to obtain and exchange information tocomply with international conventions (including TIEAs) even when such

information is not of domestic tax interest.

o Law 2 (Know your Client), published in the Official Gazette onFebruary 1, 2011, addresses the practice of anonymous accounts known as

Bearer Shares by requiring the law firms that incorporate corporations to

conduct due diligence to verify the identity of the owners and to share that

information with Panamanian authorities upon request.

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U.S.-PANAMA TRADE PROMOTION AGREEMENTEXPANDING MARKETS FOR AMERICAS FARMERS AND RANCHERS

Panama is an important market for Americas farmers and ranchers. In 2010, the United States exported over$450 million of agricultural products to Panama, more than double U.S. agricultural exports to Panama in 2005.Top U.S. exports were corn, soybean cake and meal, wheat, rice, and horticultural products.

Under the Caribbean Basin Initiative, more than 99 percent of Panamas agricultural exports enter the U.S.market duty-free. Currently, less than 40 percent of U.S. agricultural exports enjoy duty-free access to thePanamanian market.

The U.S.-Panama Trade Promotion Agreement (Agreement):

Immediately eliminates duties on half of U.S. farm exports, including on high-quality beef, frozen turkeys,sorghum, soybeans, soybean meal, crude soybean and corn oil, almost all fruit products and tree nuts, wheatmost peanuts, whey, cotton, and many processed products.

Eliminates nearly all of remaining tariffs on U.S. farm exports within 15 years. Immediately provides duty-free access through tariff rate quotas (TRQs) for specific volumes of standard

grade beef, chicken leg quarters, pork, corn, rice, and dairy products.

COMMODITY SPECIFIC BENEFITS

Corn In 2010, the United States exported nearly $70 million of corn to Panama. The Agreement providesimmediate duty-free access for a specific volume of U.S. corn through a 298,700 metric ton TRQ, with 3percent compound annual growth. Panama will phase-out the out-of-quota tariff of 40 percent over 15 yearswith tariff reductions beginning after 5 years.

Soybeans and Soybean Products In 2010, the United States exported $65 million of soybeans and soybeanproducts (meal and oil) to Panama, $57 million of it soybean meal. The Agreement locks in duty-free treatmentfor U.S. soybeans, soybean meal and crude soybean oil. Panama will phase-out the 20 percent tariff on crudesoybean oil over 15 years beginning after 5 years.

Wheat In 2010, the United States exported nearly $37 million of wheat to Panama. The Agreement locks induty-free for U.S. wheat.

Rice In 2010, the United States exported over $36 million of rice to Panama. The Agreement providesimmediate duty-free access for a specific volume of rice through two TRQs totaling 12,190 metric tons, with 6percent compound annual growth. Panama will phase-out the out-of-quota tariff of 90 percent over 20 years

beginning after 10 years.

Horticulture and Horticultural Products In 2010, the United States exported over $50 million worth ofhorticulture and horticultural products to Panama (including fresh and processed fruits and vegetables, nuts,coffee and tea). Panamas tariffs on these products range from zero to 81 percent. Under the Agreement,Panama will provide immediate duty-free access on nearly 80 percent of these products. With a few exceptionsPanama will phase-out tariffs on most of the remaining products over 5 years.

FACT SHEETS - U.S.-PANAMA TRADE PROMOTION AGREEMENT

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