WTO Trade Policy Review of Panama
Statement by Deputy Chief of Mission Chris Wilson
July 23, 2014
For the Record
Thank you, Chair. The United States is pleased to welcome Melitón Arrocha, Minister of Commerce and Industry, and the other members of the Panamanian delegation to the second Trade Policy Review (TPR) of Panama. We would also like to express our appreciation to the WTO Secretariat and the Government of Panama for the reports provided in advance of this meeting.
Panama occupies a unique place in international trade. The Panama Canal connects two great oceans and plays a pivotal role in the flow of goods around the world. As Panama approaches the 100th anniversary of the opening of the Panama Canal next month (August 15) we are reminded that a large part of Panama’s economy is predicated on the importance of moving goods more efficiently and providing related services to support that activity. With the expansion of the Panama Canal, Panama’s role in international trade can be expected to become even more important.
In the seven years since Panama’s last TPR, Panama has experienced sustained economic growth, with an average 8.6 percent rate of growth over that period; one of the highest levels of GDP growth in Latin America and an annual growth forecast between 5.8 and 8 percent through 2019. This economic growth reflects a number of the steps that the government of Panama has taken to further integrate its economy into the global trading system. The Secretariat, in its report, points to accomplishments and advances in the areas of customs, intellectual property, and government procurement, among others.
We note that at the time of Panama’s last TPR in 2007, the United States-Panama Trade Promotion Agreement (U.S.-Panama TPA) had not yet entered into force. This comprehensive free trade agreement, which entered into force on October 31, 2012, covers trade in goods and services, intellectual property rights, investment, telecommunications, labor, and environment. As detailed in the Secretariat’s and the Government’s reports, Panama undertook a number of reforms to implement the TPA. These are measures that we believe contribute widely to the multilateral trading system and the expansion of global trade, and also benefit Panama’s other trading partners.
As Panama’s number one trading partner, the United States has a strong, positive, and growing commercial relationship with Panama. According to U.S. trade statistics, our total two-way goods trade during 2013 was US$11.2 billion. U.S. goods exports to Panama in 2013 were US$10.8 billion, and U.S. goods imports totaled US$449 million. Panama is currently the United States’ 45th largest goods trading partner.
As it did in its 2007 TPR, Panama has identified attracting foreign direct investment as a key element of its overall economic growth and trade strategy. We applaud Panama for implementing policies that have resulted in sustained inflows of FDI since its last TPR – particularly in the face of the global economic downturn in 2008 and 2009, and encourage Panama to take steps to further diversify areas for FDI so as not to see a decrease once the Canal expansion is completed. This inflow is a sign of the confidence that foreign investors have in the economic potential and stability of the Panamanian market, and we note that the IMF expects that the U.S.-Panama TPA, (as well as the other FTAs Panama has signed) will help maintain high levels of FDI. The United States has long been Panama’s largest source of foreign direct investment.
As I’ve noted, Panama changed a number of laws and regulations in order to implement the U.S.-Panama TPA. While these changes were significant and transformative actions, Panama will gain the most benefit from them if Panama also provides a high level of regulatory transparency to facilitate investment and market access. The Secretariat’s report noted in several places that Panama has made a number of notifications to the WTO. We encourage Panama to increase its efforts towards regulatory transparency and to make more extensive and effective use of WTO notification procedures, for example in the areas of Sanitary and Phytosanitary measures and Technical Barriers to Trade. We note that the Secretariat’s report identified a number of notifications that were lacking in the areas of IP, agriculture, trade protection, and countervailing measures. We urge Panama to update its notifications in these areas. Panama should take credit for all the positive steps it has made in many of these areas.
We do have some areas of specific concern that I’ll briefly highlight. The Secretariat’s report noted that in June of 2013 through Law No. 41 of that year, Panama limited foreign capital participation in companies offering auxiliary maritime services. This law restricts foreign investment in companies or vessels engaged in auxiliary maritime services because it requires that Panamanians or Panamanian beneficiaries hold a 75 percent stake in these entities. In our view, this law reflects a policy that runs counter to Panama’s desire to attract foreign investment and become a logistics hub. The Secretariat’s report also stated that Panama does not extend national treatment when applying domestic taxes in the case of fuel mixed with ethanol from abroad. A higher rate of the Consumption Tax on Petroleum-Derived Fuels (ICCDP) applies for fuels mixed with foreign ethanol than applies to fuel mixed with domestic ethanol, and the stated purpose of the measure is “to protect domestic production of sugar cane used to produce bioethanol.” We urge Panama to reconsider its policies in these areas in the context of its WTO obligations as well as its related FTA obligations, and we hope to hear more in this review about Panama’s plans to address these issues.
We have submitted a short list of questions about specific issues in Panama’s trade regime. We look forward to reviewing and discussing Panama’s responses.
The United States is committed to building on our current strong trade and economic partnership with Panama and supports Panama’s progress along the path of global economic integration that it has so strongly pursued. We commend Panama on its active participation in the WTO, for its commitment to the multilateral trading system, and for showing ambition in the pursuit of trade liberalization through the Information Technology Agreement and the Trade in Services Agreement negotiations. We particularly appreciate the active and constructive leadership of Ambassador Alfredo Suescum here in Geneva. We look forward to continued work with Panama, both bilaterally and within the WTO. We especially hope to work closely with the Panama in implementing the WTO Trade Facilitation Agreement, recognizing the positive role Panama has taken in those negotiations, and knowing the considerable benefits that will accrue to countries like Panama.
We remain committed to continued close cooperation with Panama to deepen our relationship bilaterally as well as in the WTO.