On Free Trade

The other night I watched President Obama deliver his address on Health Care to Congress and I couldn't help but get the impression that he is a formidable political force. No matter what your political leanings or if you are or not at all involved with US domestic politics, there is no doubt that things have changed in Washington and that when the situation requires a confrontation with the powers that be, the President is willing and able.
In June of 2007, the US and Panama signed a Trade Promotion Agreement which was promptly ratified by the Panamanian legislative assembly, but to this date awaits ratification by the US Congress. President Bush kept the Panamanian agreement from going to a vote hoping to persuade, and when that failed coerce, Congress to take up a vote on Colombia. Conveniently, Panama provided an excuse in the form of the election to the head of the legislative branch of Pedro Miguel Gonzalez, indicted in the US for the alleged murder of two American servicemen in Panama. Gonzalez has left office since September of 2008.
As the political makeup of the US Congress changed, even within the Bush presidency, opponents of Trade in Congress led political activism against the Agreement and introduced additional demands regarding labor issues and as of late picking up the banner of the OECD fight against tax havens. A list in which Panama is included.
Insofar as labor issues the substantive fact is that Panama has labor legislation that provides benefits and protection to every last Panamanian worker which by most accounts are equal to and in most cases exceed the vast majority of collective bargaining agreements in the US. One of the ironic demands presented by the US labor lobby is to reduce the number of employees required by Panamanian law from 40 to 20 employees to permit the formation of a new Union. Ironic because any number of employees starting from the very First one can affiliate with an established national Union, thus this measure is opposed by Panamanian labor since it would erode their base. There is also the very conspicuous matter of ILO rulings against Panama because of legislation that allows striking workers to shut down operations of the company in violation of right-to-work provisions. Needless to say, we haven't seen any US labor lobby pushing for Panama to comply on this count.
On the matter of OECD tax havens, there are two distinct issues at play: Bearer shares in Panamanian companies and the demand for a Tax Information Exchange Agreement (TIEA). Since shortly after the US invasion of Panama in December of 1989, Panama and the US have had a Mutual Legal Assistance Treaty (MLAT) which covered money laundering , drug enforcement and terrorism. In all the nearly 10 years since the MLAT has been in effect only a handful of requests have been presented, all of which have been properly responded to by Panama. The banking industry implemented very strict "Know Your Customer" policies making it harder to open a bank account in Panama than in the US. Ironically, Panamanian banks do not allow corporations with bearer shares to open accounts with them and haven't done so for many years. American money is not hidden in Panamanian banks. The substantive issue is the bearer shares and Panama has offered to either eliminate or otherwise immobilize them through a register. Rhetoric aside, this is the technical issue that will resolve the matter of being able to go after US tax evasion done through Panamanian companies. The signature of the TIEA will likely do very little as demonstrated by actual experience of 10 years with MLAT.
The anti-Trade movement in the US seeks to protect American jobs from being exported overseas, yet Panama presents a unique opportunity for Small and Medium Businesses in the US to participate in the export market. The Panamanian economy, some 3.5 million people and $20B+ in GDP has just the right size that would allow for the participation of export goods and services by US SMB's. The large industrial and corporate conglomerates have always been able to export and they are the ones exporting the jobs. SMB's are a source of good stable American jobs.
During his speech, President Obama repeatedly went back to the necessity of not doing what is politically expedient but what's right. Right by the American people and right by the neighbors in the region, especially those few, like Panama, which are still relatively safe from threats by the wholesale export of anti-democratic and anti-capitalist ideologies on the rise in Latin America.
I maintain a positive outlook. The US Congress needs to take up the Trade Agenda sooner rather than later, and the only one missing in the game is the President of The United States.