Canada and Panama Sign Trade Pact, Edging Out U.S.

By May 14, 2010Trade

Whatever concerns over Panama’s tax openness some in the U.S. Congress and Obama Administration might have, it doesn’t seem to bother our friends to the North very much: Canada and Panama signed their Free Trade Agreement (FTA) this morning. (You can read the text of the agreement and see the statement of Canada’s Minister of Foreign Affairs and Trade.)

Canada exports far less to Panama than the United States: $49 million in recession-hit 2009 and $75 million in 2008, versus our exports of $2.2 billion in 2009 and $2.6 billion in 2008. However, looking at very broad sectors of Panama’s industrial imports, the United States and Canada compete head-to-head in several export sectors that are in the top 10 by value for both nations, including paper/paperboard, machinery/reactors/boilers, electrical machinery, and food waste (not sure exactly what fits into that category, but we shipped $69 million worth to Panama last year).

But — Canada’s exports will now enjoy duty-free access to Panama, whereas our products continue to face duties averaging 14 percent. So, our neighbors in Ottawa and Toronto, Vancouver and Montreal, Medicine Hat and Saskatoon will now have a competitive advantage against American manufactured goods and agricultural products.

It’s probably also a good time to point out that Panama has replaced Chile as the Latin American country with the best business climate, according to the fifth annual Latin Business Index from Latin Business Chronicle.

When we look at the FTAs that the European Union and Canada are signing and negotiating, it looks like a flight pattern at a busy airport at rush hour. Three years after the May 10th Agreement was signed to move four pending FTAs with Colombia, Korea, Panama and Peru, we are still waiting to pass three of them. Meanwhile, Canada has FTAs moving with Panama and Colombia, and is negotiating with the EU and Korea. The European Union has FTAs nearly complete with Colombia, CAFTA (including Panama), and Korea, and is negotiating with India and MERCOSUR.

As far as Canada-Panama, we may not need to worry too much about Canadian manufacturing pushing aside U.S. products (in the near-term, anyway). But we should be wide awake with worry about the EU, Canada, Korea and others signing FTAs at such a rapid clip while we are quietly sitting on our hands. This is the first of many FTA announcements we’ll be seeing from some of our major competitors around the world. Many of them will be with existing U.S. FTA partners, or with the three pending FTAs we haven’t yet passed. Each one of these FTA signings means a loss of American manufacturing competitiveness, and with it the promise of new jobs, new growth and new opportunities.

Doug Goudie is NAM director for trade policy.

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